Virtuous stores these separate values for your use with reporting and receipting:
- Amount - the amount the donor has given in total (which includes donor paid costs from credit card processing fees)
- Tax-Deductible Amount - the amount that can be deducted from the donor's income
- Gift Tax-Deductible - whether or not the full gift amount is tax-deductible (True/False)
Most of the time, donations are tax-deductible, which means the donor can deduct the amount of the donation from their income, resulting in reduction of the amount of taxes they owe. This is the case when they receive nothing in return for their donation. In other words, the Tax-Deductible Amount is the same as the gift amount (even if they've covered processing fees). So:
Amount = Tax-Deductible Amount
But when the donor does receive an item or benefit in return, the donation is either not tax-deductible or only partially tax-deductible. In other words, the Tax-Deductible Amount may not equal the gift amount.
It is the Tax-Deductible Amount that is most important for receipting purposes because it tells the donor what they can actually deduct from their income.
Virtuous calculates this value a few different ways:
Marking a Gift as Not Tax-Deductible
When entering Gifts, you have the option to select that a Gift is not tax-deductible:
If you check this box, Virtuous will calculate the Tax-Deductible Amount of the Gift as follows:
Amount - Amount = Tax-Deductible Amount
This is just a fancy mathematical way of saying that the Tax-Deductible Amount will always be 0.
Designating a Gift to a Project Marked as Not Tax-Deductible
When creating Projects, you have the option to select "Not Tax-Deductible":
This means that Gifts designated to this Project are either partially tax-deductible or not tax-deductible at all.
If you check this box, any Gift Split applied to this Project will be deducted from the Amount as follows:
Amount - (Gift Split1 - Gift Split2 - Gift Split3...) = Tax-Deductible Amount
(Gift Split refers to any Gift Split designated to a Project marked as Not Tax-Deductible)
In some cases, this means that the Tax-Deductible Amount will be 0, but this is not always the case, especially for Gifts with multiple splits.
Example 1: Harry makes a $1000 donation. The full Amount is designated to Project A, funded by non-tax-deductible contributions. Let's see how Virtuous would calculate the Tax-Deductible Amount:
Amount - (Gift Split to Project A) = Tax-Deductible Amount
$1000 - ($1000) = Tax-Deductible Amount
$0 = Tax-Deductible Amount
Thus, the Tax-Deductible Amount would be $0.
Example 2: Sally makes a $100 donation. $50 is designated to Project A, funded by tax-deductible contributions, and $50 is designated to Project B, funded by non-tax-deductible contributions. Let's see how Virtuous would calculate the Tax-Deductible Amount:
Amount - (Gift Split to Project B) = Tax-Deductible Amount
$100 - ($50) = Tax-Deductible Amount
$50 = Tax-Deductible Amount
Thus, the Tax-Deductible Amount would be $50.
Note: If you check this box in conjunction with any of the other methods indicated below, the Tax-Deductible Amount will be 0.
Linking a Gift to a Premium
Premiums in Virtuous are used to track non-tax-deductible benefits that donors receive in return for their contributions, which reduce the tax-deductible amount of a charitable gift. When entering Gifts, you have the ability to link a Gift to one or more Premiums:
Sometimes, this means that the Tax-Deductible Amount will be 0, but this is not always the case. There are a few variables to consider with this particular equation:
- Fair Market Value of the Premium - this is established when creating said Premium.
- Quantity of the Premium - this is established when entering the Gift linked to said Premium.
So, if you link any Premium with a Gift, the deduction will be as follows:
Amount - ([Premium1 Fair Market Value * Quantity] + [Premium2 Fair Market Value * Quantity] + [Premium3 Fair Market Value * Quantity]...) = Tax-Deductible Amount
Now, let's walk through a few examples.
Example 1: Harry makes a $100 donation. In return, he receives one T-shirt with a Fair Market Value of $10. Let's see how Virtuous would calculate the Tax-Deductible Amount:
Amount - ( Premium1 Fair Market Value * Quantity) = Tax-Deductible Amount
$100 - ($10 * 1) = Tax-Deductible Amount
$100 - $10 = Tax-Deductible Amount
$90 = Tax-Deductible Amount
Thus, the Tax-Deductible Amount would be $90.
Example 2: Sally makes a $1000 donation. In return, she receives two event tickets, each with a Fair Market Value of $20. Let's see how Virtuous would calculate the Tax-Deductible Amount:
Amount - (Premium1 Fair Market Value * Quantity) = Tax-Deductible Amount
$1000 - ($20 * 2) = Tax-Deductible Amount
$1000 - $40 = Tax-Deductible Amount
$960 = Tax-Deductible Amount
Thus, the Tax-Deductible Amount would be $960.
Example 3: Jerry makes a $2000 donation. In return, he receives two event tickets, each with a Fair Market Value of $20, as well as a T-shirt with a Fair Market Value of $10. Let's see how Virtuous would calculate the Tax-Deductible Amount:
Amount - ([Premium1 Fair Market Value * Quantity] + [Premium2 Fair Market Value * Quantity]) = Tax-Deductible Amount
$2000 - ([$20 * 2] + [$10 * 1]) = Tax-Deductible Amount
$2000 - ($40 + $10) = Tax-Deductible Amount
$2000 - $50 = Tax-Deductible Amount
$1950 = Tax-Deductible Amount
Thus, the Tax-Deductible Amount would be $1950.