As we emerge from pandemic restrictions, in-person fundraising events are beginning to rebound, especially athletic events. This is a good time for a quick refresher course on the charitable deduction rules related to events, which can be tricky.
a general rule, if you purchase a ticket to a fundraising event and attend the
event, the IRS only allows a tax-deduction for the portion of the ticket price
for which you received nothing of tangible value in return. So, when the
charity sends a receipt for the gift, you will see that the charity has
subtracted the fair market value of the perks--food, beverage, entertainment,
T-shirts, and other goodies -- from the full amount of the contribution. The
rules for raffles, auctions, and games of chance are also complex, exacerbated by the
increase in virtual events and online fundraisers.
more, while straightforward gifts to charities from your Donor Advised Fund with the Community Foundation are perfectly fine (and indeed, one of the primary
purposes of Donor Advised Funds), it’s problematic to purchase even the
charitable component of an event ticket using your Donor Advised Fund dollars.
the reason for all of this complexity? Simply put, tax-deductible dollars
cannot be used for private
benefit. The whole point of the charitable tax-deduction is to
incentivize taxpayers to use their own money to help others. Even when a
portion of a donation can be tied to funding the charity's programs, the
intermingling of event-related benefits back to the donor (even if it’s just a t-shirt or a chicken dinner) becomes too much of a tangled web, in the IRS’s
view, to discern the true amount of the charitable deduction, and without that
clarity, none of it is deductible.
good news here is that the team at the community foundation is on top of it. We're here to answer your questions about the deductibility of certain
transactions and how best to deploy your Donor Advised Fund or other fund assets to
help the charities you care about.