“We are tax exempt” does not necessarily mean that contributions are tax deductible. Tax exempt simply means the organization does not have to pay taxes.

Tax deductible means the donor can deduct contributions to the organization on his or her federal income tax return. The Internal Revenue Code defines more than 20 different categories of tax exempt organizations, but contributions to only a few of these categories are also tax deductible. Principal among tax deductible groups is the 501(c)(3) category, broadly termed charitable organizations.

To obtain tax exempt status under Section 501(c)(3), an organization must file documents with the IRS that prove it to be organized and operated for the charitable purposes specified by the Internal Revenue Code. The IRS looks at these documents only in terms of the code; it does not approve specific charities or judge other aspects of the charity’s efficiency.

Organizations receiving 501(c)(3) status are those that the IRS has considered charitable, educational, religious, scientific, or literary, those that prevent cruelty to animals, and those that foster national or international amateur sports competitions.

When the IRS rules positively on an application, the organization receives a “Letter of Determination” formally notifying it of its status. A copy of this letter should be available from the organization as verification of its tax exempt status.

Generally, contributions to organizations tax exempt under other sections of the IRS code are not deductible as charitable donations, but they might be deductible as business expenses.

If you are unsure about an organization’s tax status, or would like more information about tax exemptions and deductions, contact your local IRS office.