Article Highlights:Charity Auctions Use of an Asset Charity Volunteer Away-From-Home Travel Expenses Entertainment Vehicle Use Uniforms Vehicle Donations Valuing Non-cash Contributions Documentation Charitable contributions are deducted as part of a taxpayer’s itemized deductions on IRS Schedule A, except for the special 2020 and 2021 provisions that allow up to $300 ($600 for married taxpayers filing jointly for 2021) of cash donations as a deduction for non-itemizers.Charitable contributions can take many forms, and some are unusual or misunderstood. The following includes issues that a taxpayer may encounter related to non-cash contributions.Charity Auctions – It is not uncommon for charitable organizations to conduct charity auctions where individuals contribute items to be auctioned off that others bid on, with the proceeds going to the charity. Frequent questions arise related to the charitable income tax deduction for those contributing items for the auction and for those that were winning bidders who purchased items at the charitable auction. As with most things tax, the answers can be convoluted.Donors – Generally a donor will be eligible for a charitable deduction equal to their basis in the item contributed, not its current fair market value (FMV).Example 1: A donor purchased an antique vase several years ago for $400 and contributed it for a charity auction. The antique’s current fair market value is $2,000, and the high bid at the auction was $3,000. The donor is only entitled to a charity deduction of $400.Sometimes a donor will contribute the use of property, such as use of the donor’s timeshare or vacation rental. Unfortunately, per IRS regulations, granting an individual use of property while retaining ownership does not constitute a charitable gift and no charitable deduction is permitted. Nevertheless, the donor may deduct the cost of maintaining a personally owned asset to the extent its use relates to providing services for the charity.Purchaser – The winning bidder may claim a charitable contribution deduction only for the excess of the purchase price paid for the item over its fair market value.Example 1 (continued): The purchaser of the antique vase would be allowed a charitable contribution deduction of $1,000, the difference between their winning bid of $3,000 and the FMV of $2,000.Charity Volunteer – If individuals volunteer their time to a charitable organization, they probably qualify for some tax breaks. Although no tax deduction is allowed for the value of services performed for a qualified charity or federal, state or local governmental agency, some deductions are permitted for out-of-pocket costs incurred while performing the services. The following are some examples:Away-From-Home Travel Expenses - Away-from-home travel expenses while performing services for a charity include out-of-pocket round-trip travel costs, taxi fares, and other costs of transportation between the airport or station and hotel, plus 100% of lodging and meals. These expenses are only deductible if there is no significant element of personal pleasure associated with the travel or if the services for a charity do not involve lobbying activities.Entertainment - The cost of entertaining others on behalf of a charity, such as wining and dining a potential large contributor are allowed (but the costs of the volunteer’s own entertainment and meals are not deductible).Vehicle Use - If the volunteer uses their car or other vehicle while performing services for a charitable organization, they may deduct their actual unreimbursed expenses that are directly attributable to the services, such as gas and oil costs but not repairs, or deduct a flat 14 cents per mile for the charitable use of their car. Parking fees and tolls are also deductible.Uniforms - Volunteers can deduct the cost of a uniform they wear when doing volunteer work for the charity, as long as the uniform has no general utility. The cost of cleaning the uniform can also be deducted.There are some misconceptions as to what constitutes a charitable deduction, and the following are frequently encountered issues:Depreciation - No deduction is allowed for the depreciation of a capital asset as a charitable deduction. This includes vehicles and computers.Example 2: Kathy volunteers as a member of the sheriff’s mounted search and rescue team. As part of volunteering, Kathy is required to provide a horse. Kathy is not allowed to deduct the cost of purchasing her horse or to depreciate the value of her horse. She can, however, deduct uniforms, travel, and other out-of-pocket expenses associated with the volunteer work.Use of an Asset - A taxpayer who buys an asset and uses it while performing volunteer services for a charity can’t deduct its cost if he or she retains ownership of it. That’s true even if the asset is used exclusively for charitable purposes.To verify volunteer charitable contributions:Get written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid. For example, if you travel out of town as a volunteer, request a letter from the charity explaining why you’re needed at the out-of-town location.You should submit a statement of expenses to the charity if you are paying out of pocket for substantial amounts, preferably with a copy of the receipts. Then, arrange for the charity to acknowledge the amount of the contribution in writing. Maintain detailed records of your out-of-pocket expenses—receipts plus a written record of the time, place, amount, and charitable purpose of the expense. Donating a Vehicle to Charity – A few years back, this was a popular type of charitable donation promoted by many charities. However, vehicle donations were so abused by taxpayers claiming values higher than what the vehicles were worth that Congress had to step in. The result is several rules that, in some cases, limit the amount of the charitable deduction.Although not as prevalent as in the past, there are still charities that solicit contributions of vehicles. For taxpayers that contribute to a charity a motor vehicle (or a boat or airplane), the deduction is limited for those vehicles with a claimed value exceeding $500 by making it dependent upon the charity’s use of the vehicle and imposing higher substantiation requirements.If the charity sells the vehicle without any “significant intervening use” to substantially further the organization’s regularly conducted activities or without any major repairs, the donor’s charitable deduction can’t exceed the gross proceeds from the charity’s sale of the vehicle. Examples of qualifying significant intervening use include delivering meals to the needy or elderly every day for a year or driving 10,000 miles during a one-year period while delivering meals.The gross proceeds limitation on a donor’s auto contribution deduction doesn’t apply if the charity sells it at a price significantly below FMV (or gives it away) to a needy individual. This exception applies only if supplying a vehicle to a needy individual directly furthers the donee’s charitable purpose of relieving the poor and distressed or the underprivileged who need a means of transportation. In this case, the fair market of the vehicle is used to determine the amount of the contribution.