Deducting charitable donations is a common method many taxpayers use to reduce their tax bills each year. Not every payment you make to a charity will qualify for the deduction, though. If you’re thinking the cost of all those raffles tickets you bought at various charity events and fundraisers you attended are deductible -- they’re not. If you ever win one of these charity raffles, you might actually have additional income to report on your return.
Benefitting From Donations
The charitable deduction rules prohibit you from treating the full value of your donation, whether in money or property, if you receive some financial benefit from the charity. For example, if you attend a charity fundraiser dinner and the cost of admission is $500, the federal government acknowledges that most of your ticket price constitutes a deductible donation, but you will need to reduce your deduction for the value of the meal and drinks you receive. Because of the possibility of winning a prize, the cost of raffle tickets you purchase at the event aren’t treated the same way by the IRS and are never deductible as a charitable donation.
Regardless of your charitable intent, there are no tax implications to the money you spend to purchase raffle tickets from a charity. Under the Internal Revenue Code, these costs are treated as nondeductible gambling losses. A distinguishing characteristic that makes losing raffle tickets purchased from a charity different than the price of admission to a fundraiser is that with a raffle ticket, there is the expectation of an economic benefit, irrespective of how remote the possibility is.
If you’re lucky enough to win cash or property with a charity raffle ticket, you should know that the IRS treats your prize as taxable gambling winnings that must be reported on the “other income” line of your tax return. Moreover, the charity might have an obligation to report your raffle winnings to the IRS on a W-2G form if the value of your prize is worth $600 or more and is at least 300 times the cost of the raffle ticket. You will receive a copy of the W-2G, and you’ll need to attach it to your 1040 form just like you do with the W-2s you receive from employers.
Deducting Raffle Tickets
The only time you can deduct the cost of raffle tickets you purchase from a charity is when you report any type of gambling winnings on the same return -- not just winnings from a raffle ticket. To take the deduction, though, you’ll need to itemize your deductions on Schedule A. If you don’t, your gambling winning must still be reported as income. When reporting gambling winnings, your deduction for losing raffle tickets and other gambling losses can't exceed the amount of gambling winnings reported on the return. In other words, your losing raffle tickets and other gambling losses can only offset gambling winnings.