Are gifts to municipalities tax deductible for federal income tax purposes?
Yes. The Federal Internal Revenue Code
provides that a contribution or a gift to a political subdivision of a
state is tax deductible, but only if the gift is made for exclusively
public purposes. 26 U.S.C. sec. 170(c)(1). Cities and villages are
subdivisions of the state. Thus, any gift or contribution to a
municipality which is made for exclusively public purposes is tax
deductible. For example, a cash contribution to a city police department
to be used as a reward for information about a crime is tax deductible.
Similarly, a gift of money or property to a village library to be used
for the construction of a new library building is tax deductible.
Contributions to a municipality which are earmarked for a particular
individual, family or private organization are not tax deductible
because they are not made solely for a public purpose. Thus, for
example, a cash gift to a municipality for “flood disaster relief” or
other disaster relief which is earmarked for a certain business or
individual is not tax deductible.
For more information on the
tax deductibility of contributions and gifts to municipalities see
Internal Revenue Service Publication 526.