Substantiating Charitable Contributions

Before 1993, taxpayers taking charitable contribution deductions on their tax returns could verify their deductions using only bank statements or canceled checks. No third-party substantiation was required. Bank statements and canceled checks provide limited information however, so the IRS found auditing high-value donations difficult. Further, encouraged by lax verification requirements, many taxpayers were inflating the value of their gifts or making up donations entirely to lower their tax bills. To close this loophole, Congress added Section 170(f)(8)(A) to the Internal Revenue Code to create strict substantiation rules for charitable contribution deductions.

Why does this matter?

Congress was motivated to solve this problem because of the tax expenditure associated with the charitable contribution deduction.  Tax expenditures represent the revenue loss from the government budget caused by special tax provisions such as deductions, exemptions, and preferential rates. The charitable contribution deduction has long ranked among the top ten annual tax expenditures. For fiscal year 2026, the Joint Committee on Taxation projects that the US government revenue loss for the charitable contribution deduction by individuals and corporations will be approximately $78 billion. For fiscal years 2025-2029, the projected total loss is expected to be $403.9 billion.

What does Section 170(f)(8)(A) require?

For any contributions of cash, check, or other monetary gift, you must either maintain a bank record or a written communication from the recipient organization showing the name of the charity, and the date and amount of the contribution. In addition, for charitable contributions of $250 or more, Section 170(f)(8)(A) mandates that taxpayers have a contemporaneous written acknowledgment (CWA) of the donation from the recipient charity. The CWA must contain the following elements:

• The amount of cash and/or a description of (but not value of) any non-cash property received by the organization.
• A statement affirming that the charity did not provide any goods or services in payment or exchange for the property contributed.
• If goods or services were provided by the charity in exchange for the donation, a description and good faith estimate of the value of such goods or services.

Any other type of written record, such as a log of contributions, is insufficient, and if the CWA you receive from a charity does not contain all the elements listed above, the IRS can deny your charitable contribution deduction.

Does the IRS really enforce these rules?

Two recently decided cases in the US Tax Court have come to our attention (and were the inspiration for this article). The cases involve two first cousins who donated 13.3 acres of land valued at $665,000 to Highland City, Utah in 2018. They had ample  written documentation of the gift, including an appraisal of the land, copies of letters to the city calling the property a donation and a gift, and a report from a City Council meeting indicating that there would be no expenditure to the town for the donation, and that the town would accept the donation.

The IRS denied the deduction because none of the documents contained a statement from the town that expressly said the cousins hadn’t received goods or services in exchange for their donation.

The cousins appealed the IRS decision to the Tax Court. After reviewing the case, the court stated that the requirements of a CWA are strict, and although the acknowledgment doesn’t have to take any particular form and may be made up of a series of documents, it must adhere to the requirements of the statute. Because none of the cousins’ documents contained the required statement, the court sided with the IRS and denied the tax deduction.

Older Tax Court decisions have reached the same conclusion. In fact, in a 2012 case, one judge wrote, “We recognize that this result is harsh…but Congress was quite specific about what the charitably inclined have to do to defend their deduction, and we cannot in a single sympathetic case undermine those rules.”

The statute is strict and because charitable deductions often provide substantial reductions in tax liability, the IRS can and does go after taxpayers who do not exactly comply.

What to do

When making donations to charity, keep the following records:

• Bank records, including canceled checks that show the date, amount, and recipient of the donation.
• A written statement from the charity that provides
  • The name of the charity and the amount of the donation
  • A statement that the charity did not provide any goods or services in payment or exchange for the property contributed.

You should have the statement in hand before you file a tax return claiming a charitable deduction.

In 2026, taxpayers who do not itemize deductions can still deduct charitable contributions up to $1,000 (single filers) and $2,000 (joint filers) on their tax returns. This non-itemized deduction is only available for cash donations including donations paid by check, credit card, online, and payroll deductions. Non-cash donations of property do not qualify. If you want to take advantage of this deduction and are  making a gift of $250 or more to any one organization, you will need CWAs that adhere to the strict requirements of the statute.

This article does not cover all substantiation requirements

As you know, tax law is complicated and this article does not discuss all the rules related to charitable tax deductions. Donations of non-cash property have different substantiation requirements, and additional record keeping is required for contributions for which you did receive goods or services. Other rules apply when you make cash contributions through payroll deductions. If you have questions about issues discussed (or not discussed) in this article, give us a call! We love hearing from you and our tax professionals are happy to answer your questions.