Tax deduction for non-profit charity

[MyName]

I live at a non-profit retirement community (CCRC).  I purchased a food plan.  I pay $250 and get $450 in credits to pay for meals each month.  When I buy a meal, I use up some credits.   Any credits I do not use up are lost.  Example, I spend $300 in credits and have $150 unused.  Can I take the unused credits and make it a donation to the non-profit CCRC and then take it as a deduction on taxes?

[xmasbaby0]

The fact that the community is non-profit does not automatically mean it is a recognized charity for which a donation is deductible.   "Non-profit" and "charity" are not the same thing.  Is this community on the list of IRS charities?

NON-PROFIT  https://ttlc.intuit.com/questions/2902085-are-nonprofits-considered-qualified-charitable-organizatio...

And....even if you use the unused food credits as a donation---do you have enough other itemized deductions to exceed your standard deduction?   Unless you do, then a donation will not have any effect on your federal tax refund or federal tax due.

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts)   The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

Your standard deduction lowers your taxable income.  It is not a refund.  You will see your standard or itemized deduction amount on line 12 of your 2020 Form 1040.

2020 Standard Deduction Amounts

Single $12,400   (+ $1650 65 or older)

Married Filing Separate  $12,400   (+ $1300 if 65 or older)

Married Filing Jointly $24,800   (+ $1300 for each spouse 65 or older)

Head of Household $18,650  (+ $1650 for 65 or older)

[xmasbaby0]

That first link does not work any more.   Try this one:

https://ttlc.intuit.com/community/credits-and-deductions/help/what-is-a-qualified-charitable-organiz...

The other thing about what you explained is that you are not paying more for the meals than the out of pocket amount you paid---so no extra actual money was paid for the meals---you did not really "donate" anything--you just did not use up your whole allowance--which was for more than you really paid.

[MyName]

Thank you.

[Mike9241]

even if a qualified charity. what you are contributing is ordinary income property. The amount you can deduct for a contribution of ordinary income property is its fair market value minus the amount that would be ordinary income or short-term capital gain if you sold the property for its fair market value. Generally, this rule limits the deduction to your basis in the property.  it is unknown what the IRS would deem your basis in the unspent $150. it could be $0. or it may be proportional $250/$450 * $150 = about $83.   

[MyName]

Excellent, you even did the math.  Thank you.

[Carl]

Let's use your actual numbers in your original post.

I pay $250 and get $450 in credits to pay for meals each month.

So I assume that $250 you pay is paid from your taxable income. If it's not paid from taxable income, then you can stop here. You have nothing to claim or deduct.

Assuming the only thing you get for $250 is $450 in meal credits, that means 45 cents on the dollar for each credit. ($250 is 55% of $450)  (If meal credits is just part of what you get for your $250, that changes the whole dynamics of this.)

I spend $300 in credits and have $150 unused.

So 55% of $150 is  $82.50. Therefore, $82.50 would be the value of your donation.

If this is a monthly thing, then that's $82.50 times twelve, or $990 a year that you donate. Assuming the organization you donate to is q qualified charity, and assuming your donation is a qualified donation, I seriously doubt that $990 a year will have any impact on your tax liability. Remember, when it comes to your SCH A deductions, they don't kick in until the total of those deductions exceeds your standard deduction.  When the standard deduction for tax year 2021 being set at $12,550 at present for a single person or someone who files married separate, You're not coming anywhere close.

Living in a retirement community tends to indicate you don't have a mortgage payment and don't pay property taxes on any real estate. So unless those assumptions are wrong (and I could be) I just don't see any way your itemized deductions would ever exceed your standard deduction based on the information provided, and the assumptions I am making.

[MyName]

Carl, The retirement community and my age give me a number of deductions to itemize my deductions.  The monthly fee portion to live in the community (housing and amenities) that I can deduct is about $18,000 a year for independent living.  If I were in assisted living and without long term care insurance, my annual cost may be around $130,000 a year.  More, for skilled nursing.  My insurance premiums and Medicare Part B are about $6,000 a year (this does not include long term care insurance).  Then there are drugs.  $$$$$.  And then there are dental, eye care and hearing which are not covered by Medicare.  There are plenty of out-of-pocket other medical costs and transportation.  I do give to charities.  And, well, there is more.

[MyName]

Also, Carl, I very much appreciate your insights and doing some math to help me understand.  Thank you.

[Carl]

Keep these things in mind also.

 - There is a difference between a non-profit organization and a not-for-profit organization.

 - Just because an organization is classified as a charity does not always mean donations are deductible.

- You should see https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contributions-written-... for what may be required for donations of more than $250.

There are two basic ways to confirm if you are donating to a qualified charity.

1) The organization should be able to produce a letter from the IRS referred to as a "Letter of Exemption". In that letter it should clearly state, "Contributions to you are deductible under section XXX of the code". For a 501c(3) it's typically section 170 of the code.

2) You can use the IRS search tool at https://apps.irs.gov/app/eos/ to see if the organization is listed on the office IRS list of those qualified to receive tax deductible donations/contributions. Do note however that just because an organization is not on that list does not mean they shouldn't be. That's where option #1 above might need to be considered.

[MyName]

More good information.  I appreciate it, thanks.