While watching last week’s Undercover Boss, I was struck with a thought, when a company donates money in the employee’s name, who gets the tax write-off? Traditionally, you “may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions.” (IRS Publication 78). This means you can donate money, clothes, vehicles, etc to a qualified organization (usually a non-profit organization). The organization, while usually a non-profit, must be organized under a 501(C)(3) tax-exempt status which may also include churches and some companies.
There are still further rules regarding how much you can deduct from your taxes. Generally, you can deduct up to 50% of your adjusted gross income for cash donations, 30% of your adjusted gross income for property donations, and 20% of your adjusted gross income for appreciated capital gains. You cannot deduct contributions to political parties, political campaigns, fees or dues to professional organizations, contributions to labor unions, chambers of commerce or business associations, or fines or penalties to be paid. Finally, you cannot deduct contributions to foreign governments, but you can deduct contributions to aid organizations like Red Cross (thus why you may text to Red Cross, but not to Haiti or Japan directly).
Should You Get A Tax Deduction When You Donate In Someone Else’s Name?
When you make a donation to charity, it’s clear who can write off the gift (you). However, what if you donated money on behalf of a deceased relative, or if your company donated money to a hospital on behalf on an employee (like on Undercover Boss), should you be able to take that deduction? Theoretically, you are the one who is spending the money, not someone else. However, the other person is the one that the Charity is receiving money from, not you, if they were questioned by the IRS would they know who the money actually came from?
Currently, there doesn’t appear to be any clear cut law on the topic. If your name and address is on the check and the memo line says it is for someone else, and your request a receipt, you can probably get the tax deduction. However, the only sure way to get a tax deduction is to make the gift yourself.
