Can I Deduct That?

The information you need so that your group’s supporters can get the full advantage from their tax-deductible donations.

by Sandra Pfau Englund

06/16/2021

Donations to qualified organizations are often tax-deductible. But do you know when? And do you provide your supporters (including yourself!) with the information they need to take those deductions? These basics will help you understand what you can and can’t take off your taxes.

Qualified Organizations

Generally speaking, you can deduct contributions only if they’re made to a qualified organization. Religious institutions and governments are tax-exempt but all other organizations (including school PTOs) must apply to the IRS to be recognized as qualified 501(c)(3) organizations.

Are donations to public schools tax-deductible? Yes. A public school is an educational organization that is run by a public government entity (e.g., a state or local school board). As long as your contribution is for a public purpose, not for the benefit of a particular student or teacher, then it’s probably tax-deductible. (See the examples below for more explanation.)

What if my PTO hasn’t applied for federal 501(c)(3) tax-exempt status? There’s no guarantee that the IRS will consider contributions made to a PTO tax-deductible unless the organization has applied for and received recognition of its exempt status from the IRS.

Tax Exemption and Nonprofit Status: What PTOs Should Know

Items That Are Tax-Deductible (and That Aren’t)

Generally, any gift or contribution for which the donor doesn’t receive anything of substantial value in return is tax-deductible. Here are some examples.

Deductible: A parent makes a $20 contribution to the PTO rather than participating in the latest fundraising drive.

Not deductible: A parent purchases $20 of wrapping paper or cookie dough during the latest fundraising drive. The amount paid for the products isn’t tax-deductible because the parent received something of value equivalent to the amount paid.

Deductible: A local restaurant contributes a $25 gift certificate to the school’s auction. The value of the gift certificate is tax-deductible for the restaurant.

Not deductible: A teacher makes the winning bid of $25 on the gift certificate. The amount paid isn’t deductible because the teacher received the gift certificate in return for her bid. However, if the teacher bid $35 for the gift certificate, then $10 of the amount paid might be tax-deductible. In that case, the PTO must provide a receipt showing the amount paid, the value of the item purchased, and the amount that qualifies as a contribution.

Deductible: The IRS allows tax deductions for mileage and other out-of-pocket expenses. To take a deduction, you must keep written records of the mileage, including the date driven and the name of the nonprofit group for which the driving was conducted. The IRS standard mileage rate for charities may be used (14 cents a mile). If the donor opts to use actual auto expenses instead of the standard mileage deduction, the operating expenses must also be recorded. For other out-of-pocket expenses, keep written receipts showing the costs paid for items donated to the PTO.

Not deductible: The IRS doesn’t allow a tax deduction for the value of someone’s time or service. In addition, you can’t deduct child care expenses incurred to enable you to volunteer your time.

Receipts

Written receipts are required for cash gifts of $75 or more. Receipts should always be provided for non-cash gifts, including out-of-pocket expenses donated on behalf of the group. The IRS requires a qualified written appraisal for non-cash gifts valued at $5,000 or more. Frequently, appraisals are recommended for non-cash gifts valued at $1,000 or more. Penalties starting at 20 percent of the amount of underpaid taxes might apply if donations are overvalued.

It’s a good idea to provide a receipt or acknowledgment for all donations as a way to thank donors and to provide them with a receipt for their tax records. Receipts should include:

The name of the organization to which the donation was made and its tax-exempt status (for example, “ABC Elementary PTO, a 501(c)(3) charitable and educational organization”).
The date the donation was made.
The amount of the donation.
A statement regarding whether anything of value was received in return for the contribution. For instance, if an auction bidder paid $35 for the restaurant certificate, the receipt should note the price paid, the value of the certificate, and the amount that is tax-deductible.

Sandra Pfau Englund is an attorney specializing in PTOs and other nonprofit groups.

Originally posted in 2004 and updated regularly.

Comments (16)

Comments

# Lorraine 2009-02-11 17:38

Please note that as of 2008, the IRS requires all Non-Profit organizations to file a 990 form regardless of how much income is made, even if you didn't earn any income.

# LIH 2010-02-01 20:50

If a local restaurant donates a gift $25 certificate to our silent auction, the value of that certificate is tax deductible for them.

If a local photographer or private tutor offers a gift certificate for a free session, is that deductible for them? I understand the time/services are not deductible.

Thanks!

# Joao 2010-12-14 10:20

Hi. If I provide free tutorship for university students, is there a way I can write that off as charity or any other category?

I'm currently not a member of any institution. I'm providing the tutoring services totally free, voluntarily.

# Craig Bystrynski 2010-12-14 17:28

You should talk to an accountant or tax preparer about your specific situation. In general, fee for services is considered taxable income.

# CGW 2012-02-21 00:28

Sandra,

I was wondering about the statement, "If a local restaurant donates a gift $25 certificate to our silent auction, the value of that certificate is tax deductible for them."

I am a small business and just wanted to make sure I understood the details here. Can you reference the portion of the IRS code that covers this deduction for businesses?

Thanks so much,

Christopher

# kathelleen parsons 2012-11-08 13:49

i have a question, but I am not sure if this board is still active.

# Craig Bystrynski 2012-11-08 14:03

Kathleen -- Yes, you're more than welcome to post a question here, on our Ask a Question forum:

http://www.ptotoday.com/answers

or on the message boards:

http://www.ptotoday.com/boards

We'll try to help with whatever information we can provide.

# EFR 2013-01-07 06:56

I would like to donate money to the PTO for new uniforms for the soccer team. The PTO already uses PTO funds to partly finance this particular school team sport. The PTO has suggested that 'directed' donations can not be accepted because the PTO might be seen as acting as a bank. I would argue that any funds donated that further its purpose should be acceptable. Can you explain why a directed donation in support of a program that is already partly funded by the PTO is not OK. I also need to know because I may volunteer to be the Tresurer next year and need to understand the rules.

# Marisol 2013-04-18 23:20

If only one person bid on an item at a silent auction but it was below the minimum bid, should the person still get the item they bid on?

# Rose Hamilton 2013-04-19 13:10

Hi Marisol,
Hopefully, this doesn't happen too often. But if it does, it's more likely that a group would just take the bid. Disappointing, for sure. But, often groups figure the item was donated and while the bid is low, it is at least something that we can put to use for the group. You can consider making it very clear up front to your auction guests that they must bid at least the minimum needed or the item would not be available. But be careful of the language so it isn't off-putting. Good luck!

# Rose Hamilton 2013-04-19 16:31

Hey again Marisol,
Thought of one more thing. If you do have folks donating items like a week's stay at a vacation spot or perhaps expensive sports tickets, a minimum bid requirement really does make sense. In these cases, the donor is giving something that could be worth a great deal and the intent is to get a nice chunk of money to the school. The intent isn't for a bidder to walk off with something like a week at a beach house for almost nothing. So, in those cases in particular, it would make sense to require a minimum and give the donor the option to pull it if no reasonable bid is placed.

# Rockne 2013-04-19 16:50

Hi Marisol -

If you had a minimum bid, you are certainly well within your rights not to grant the item to someone who bid below that. It will be your call. Some items, you may just want to take what you can get. Other items, as Rose mentioned, there may be good reason (or even requests by the donor) not to award the item.

But basically, you are certainly well within your rights not to award the item, since you did have a posted minimum bid.

Tim

# bsure 2013-05-08 00:39

what if a person receives a gift and then donates it to an organization. it is worth money to them. can they deduct the amount it sells for if they provide the entire proceeds to the organization.

lets use the ymca or a church organization as the example.
I am in ny.
thank you for your time.

# Esmeralda 2013-07-08 19:02

If someone sponsors an individual to play in a golf tournament, can the donor receive full credit for the entire sponsorship amount since they are not the ones receiving any of the goods or services the golfer that's being sponsored will be receiving?

# Debi Hansen 2014-12-30 18:33

My daughter is a cheerleader in high school. The school says they cannot force parents to pay it is considered a donation. There is zero money coming from PTSA or anywhere. It is all donation from the parents. Is this deductible?

# Nancy 2018-02-01 21:16

The easiest way I've found to avoid making a donation that doesn't even count is visiting a charity's website and donating something from the list of things they accept. That way you know you can deduct it from taxes. https://www.withcauses.org/donate-to-charity.htm

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