The IRS allows you to deduct contributions to nonprofit, 501(c) 3 organizations, but such charities are not the only groups for which a donation is tax-deductible. The IRS permits deductions to schools that are either nonprofit or supported only by local or state government funds. It doesn’t matter whether the educational institution serves preschoolers or college students, as long as it meets IRS criteria. The majority of schools are either public or nonprofit; for-profit schools include many online and vocational schools, rather than traditional colleges and universities. Keep in mind you must itemize expenses on Schedule A of Form 1040 in order to claim charitable deductions. Prior to 2017, certain tuition and other fees were tax-deductible, but that is no longer the case.
Various forms of tax deductible donations to schools are available, ranging from cash contributions at school fundraisers to establishing scholarships and even donating property.
School Fundraising Events
Schools hold fundraising events all the time, and you’ve probably contributed to your fair share of them. Are these contributions tax-deductible? It depends. Suppose the school holds a fundraising dinner with tickets priced at $100 each. You and your spouse both attend. However, even though you wrote a check to the school or paid $200 via your credit card, that’s not the allowable deductible amount. Each of you received something of value – the dinner – and that part is not considered deductible. If the dinner was worth $25, for a total of $50 per couple, you can deduct the remaining $150 on your income tax return if you are a married couple filing jointly.
If you receive an item of minimal value for your fundraising contribution, such as a pen or a hat, you don’t have to subtract the worth of the object. An item that means something to you but has little value to anyone else, such as a plaque honoring your contribution, does not need to have its worth deducted, and if the school holds a raffle and you buy tickets, the amount is not tax-deductible.
Create a legacy by donating a scholarship and take a tax deduction. As long as the scholarship goes into a tax-exempt fund, it is treated the same as any other charitable donation. You can establish a scholarship to memorialize or honor loved ones.
If you donate a certain amount of money to a school and receive nothing in return, that’s the deductible amount for income tax purposes. Get a written acknowledgment from the nonprofit school if you donate cash over the amount of $250. If you donate property to a school, use its fair market value for deduction purposes. For example, if you donate your old vehicle to a school, you can determine its fair market value via the Kelley Blue Book or another widely accepted valuation guide.
If donating art, antiques, jewelry or similar items, you may have to hire an appraiser to determine what the object is actually worth. You can’t add the appraiser’s fee to your charitable deduction, but the IRS does allow you to claim this fee as a miscellaneous deduction, as long as all of your miscellaneous deductions total more than 2 percent of your adjusted gross income. And note, if you overvalue your donated property, the IRS can assess penalties. If your valuation exceeds 150 percent, you’ll get hit with a 20 percent penalty on any underpaid tax; overvalue your donation by 200 percent and the penalty increases to 40 percent.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including Sapling, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.