Which Contributions Are Deductible?

You can deduct outright gifts of money or property that you make to a qualified charity, or that you place in a trust for the use of the charity.

However, if you receive some benefit from the gift, you can only deduct the portion of the gift that exceeds the value of the benefit you receive.

Example Jim and Shirley Jackson paid $1,000 for a table at a dinner to benefit a children's aid organization. They and eight friends attended the dinner, which would have ordinarily cost $30 per person. The Jacksons can deduct $1,000 less the $300 value of the dinners, or $700.

If you purchase items at a charitable sale or auction, you can only deduct the portion of the price you paid that exceeds the value of the item.

You can generally deduct the entire membership fee or dues you pay to a qualified organization, provided that you receive only nominal benefits in exchange, such as discounts on goods and services, free parking, and free or discounted admission to the group's events, or if you receive only token items such as mugs, T-shirts, calendars, etc.

If you make a payment over $75 that is partially in exchange for some goods or services, the organization must give you a written statement that tells you the amount you can deduct.

Gifts that don't qualify for the charitable deduction:

• gifts to civic leagues, social and sports clubs, labor unions, and Chambers of Commerce
• gifts to groups run for personal profit
• gifts to groups whose purpose is to lobby for law changes
• gifts to homeowners' associations
• direct donations to needy individuals or families
• gifts to political groups or candidates for public office
• cost of raffle, bingo, or lottery tickets
• dues, fees, or bills paid to fraternal organizations, country clubs, or similar groups
• tuition

Donated services. Although you can't deduct the value of your time, you can deduct the out-of-pocket expenses you incur in donating your time and efforts to a charity. The expenses must be unreimbursed, and directly connected with the services.

If you use your car in the service of the charity, you can deduct your actual cost of gas and oil, or you can deduct 14 cents per mile in 2002 and 2003. However, you'll have to keep written records of the mileage you drive, the name of the charity and the purpose for which you drove, and the records should be made at or near the time you actually did the driving.

You can deduct travel expenses, including meals and lodging, if you travel away from home to perform services for a charity, or if you are a chosen representative of a qualified organization at a convention. However, you can't deduct travel expenses if you attend a convention only as a member, rather than a chosen representative. In any case, you can't deduct the costs of bringing your spouse or dependents along, and you can't deduct costs of sightseeing, parties, etc.

Foster parents can deduct any expenses for caring for their foster children that exceed the nontaxable payments they received (if any). If you host a foreign exchange student under an agreement with a qualified organization, you can deduct up to $50 for each month or half-month that the student lives with you.