How to Avoid IRS Mistakes That Can Cost Your Charitable Tax Deduction

Learn the IRS documentation requirements for charitable tax deductions and how donors and advisors can avoid common mistakes when making charitable gifts. 

Making a charitable gift is one of the most meaningful ways to support the causes you care about. But when it comes to claiming a charitable tax deduction, good intentions aren’t enough. 

The IRS has strict documentation and timing requirements for charitable contributions. Even if a gift is legitimate, failing to follow the proper procedures can result in the loss of valuable tax benefits. 

A recent Wall Street Journal article illustrates just how costly these mistakes can be. In the case, two donors lost a charitable deduction worth approximately $665,000—not because the gift itself was invalid, but because they failed to satisfy a technical IRS requirement. 

The lesson is clear: when it comes to charitable giving, proper execution matters just as much as charitable intent. 

Why Charitable Documentation Matters 

Whether you’re donating appreciated securities, real estate, a closely held business interest, artwork, or other noncash assets, the IRS requires careful documentation. 

Depending on the type of gift, donors may need to: 

• Obtain a qualified appraisal  

• Complete IRS forms accurately  

• Receive a contemporaneous written acknowledgment from the receiving charity  

• Meet specific filing and timing deadlines  

• Properly structure the transfer of assets  

Missing just one of these requirements can jeopardize an otherwise valid charitable deduction. 

Complex Gifts Require Early Planning 

As more donors consider giving noncash assets, charitable planning has become increasingly sophisticated. 

Gifts of business interests, private company stock, real estate, and other complex assets often involve multiple advisors, legal documents, tax considerations, and deadlines. 

That’s why charitable planning should be part of the conversation from the beginning—not an afterthought once the transaction is already underway. 

Bringing charitable giving into discussions about tax planning, estate planning, business succession, or the sale of a business gives advisors and donors more time to satisfy technical requirements and avoid costly mistakes. 

How the Community Foundation Can Help 

The Community Foundation for Greater Atlanta regularly works alongside attorneys, CPAs, and financial advisors to facilitate charitable gifts involving: 

• Appreciated securities  

• Closely held business interests  

• Real estate  

• Retirement assets  

• Other complex charitable gifts  

By involving the Foundation early in the planning process, advisors can focus on legal, tax, financial, and accounting considerations while our philanthropic team helps coordinate the charitable aspects of the transaction. 

Working together reduces the likelihood of preventable errors and helps ensure donors achieve both their charitable goals and the tax benefits they expect. 

Best Practices for Donors and Advisors 

Whether you’re making a charitable gift yourself or advising clients, a few simple practices can help avoid unnecessary complications: 

• Start charitable planning early.  

• Involve tax, legal, financial, and charitable advisors before completing the transaction.  

• Confirm documentation requirements before transferring assets.  

• Don’t assume that requirements are the same for every type of charitable gift.  

• Review deadlines carefully to ensure all IRS requirements are met.  

Partner With the Community Foundation 

Complex charitable gifts don’t have to be complicated. 

If you’re considering a gift of appreciated assets, retirement accounts, business interests, or real estate, we’re here to help you navigate the charitable planning process with confidence.