Tax Deductible Donations Matching Gifts

Determining the Tax Deductible Component of Donations for Matching Gift Purposes

If your organization derives a significant amount of funding from membership programs, annual fundraising galas, or special events, you may have wondered whether those donations are eligible for corporate matching gift programs.

Well the facts are in; your organization may be leaving money on the table by not promoting matching gifts to these donors. In almost every case, the tax deductible component of nearly all cash and stock contributions are eligible to be doubled through employer matching gift programs.

Learn more about corporate matching gift programs.

Tax Deductibility for Matching Gifts

Nonprofit organizations that raise funds through events and memberships should let attendees know the dollar amount that is tax deductible for IRS income tax reporting purposes. The tax deductible amount of the donation, event ticket, or membership is also what donors should submit to their employer’s matching gift program.

The AFP (Association of Fundraising Professionals) states:

The tax-deductible or contributed portion of a ticket is the amount over and above the fair market value (FMV) of any benefits received. It is the responsibility of the organization putting on the event to determine the FMV and to inform the participants of the amount of the contributed portion.

View details on many of the largest national employers which offer matching gift programs.

Calculating the Tax Deductible Amount which can be Matched

It’s up to the nonprofit organization to determine the tax deductible amount of each contribution for tax and matching gift purposes. The first step is to determine the FMV of the benefits received.

One of the most common ways to determine this amount is to compare the benefits received by the donor to what those benefits would cost if it were not a fundraiser.

For example, let’s say you charge $1,000 for an annual Gala ticket. Included in the Gala is a performance by a well known band and a five course dinner. You may determine that the dinner would cost $50 from a local restaurant and a ticket to see the band would cost $100. In this case, the fair market value of the Gala ticket would be $15o which means the tax deductible component of the ticket would be $850.

Donors should use this fair market value, rather than the overall purchase price, on their company matching gift form.

While each organization has discretion in assessing fair market value, the key is to ensure the values you place on each benefit are reasonable. Is it reasonable for a steak and lobster dinner with salad and dessert to cost $10 at a five star restaurant?  Probably not. An appropriate method is to take a look at the menu of a local restaurant and use their pricing as guidance.

Calculating the FMV isn’t an exact science. It could vary by several dollars and any amount within a reasonable range would be acceptable for government reporting and matching gift purposes. The important part is that your organization is taking a fair and honest approach to estimating the FMV.

Bottom Line: Many different types of donations to your organization have a tax deductible component that can be submitted to corporate matching gift programs. Make sure you’re communicating this out to your donors and asking them to submit matching gift requests for this amount.

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