Charitable giving can help you defray personal income taxes while you support a worthy cause. As your personal wealth grows, the charitable giving income tax deduction can be an important part of your tax-planning strategy. However, you can only deduct donations to nonprofit organizations that are properly qualified as tax-exempt under 501(c)(3) of the Internal Revenue Code. Checking to ensure that an organization's tax-exempt status is still in effect can protect you if your personal charitable deductions are ever audited by the Internal Revenue Service.
The IRS allows various types of nonprofit entities to apply for an exemption from paying federal income taxes if the entity qualifies under provisions of section 501 of the Internal Revenue Code. The IRS keeps a master list of every entity that has been awarded tax-exempt status and whether the status is current or has been revoked.
Exempt Organizations Select Check
The IRS maintains an electronic database on its website that you can use to check the tax-exempt status of any company or organization. The Exempt Organizations Select Check online search tool (see Resources) provides up-to-date information on federal tax status and required filings and is a way to check if an entity's tax-exempt status has been revoked for failing to file a required report.
Another way to check the tax-exempt status of a company or organization is to call the IRS directly at 1-877-829-5500. An IRS agent will look up an entity's status for you if you provide a name, address and employer identification number. You can also ask to see an entity's IRS determination letter recognizing it as tax-exempt. If the entity is a nonprofit organization that is eligible to receive tax-deductible donations, the IRS determination letter will say so.
Claiming the Deduction
The IRS lets taxpayers take a write-off against income for certain donations of cash and goods to qualified tax-exempt nonprofit organizations, which minimizes your federal income tax bill. To claim the deduction, you must itemize your deductions on Schedule A of Form 1040, rather than claiming the standard deduction you are eligible for based on your filing status. For itemizing to be financially worthwhile, the total of all your deductions must exceed the standard deduction.
Terry Masters has been writing for law firms, corporations and nonprofit organizations since 1995. Her online articles specialize in legal, business and finance topics. She holds a Juris Doctor and a Bachelor of Science in business administration with a minor in finance.