A Season of Giving
A few weeks ago, we observed what has come to be known as "Giving Tuesday, complete with its own social media hashtag, #GivingTuesday.
This seems to have become somewhat of a kickoff, if you will, to a season of philanthropy that lasts through year end. In fact, most charities depend heavily on this season for a large portion of their contributions in order to end the year, hopefully, in the black.
As you consider your year-end giving plans, don't forget that your generous spirit may also result in valuable tax savings. Here are some things you should know in order to benefit:
Qualified Organizations
Only donations to eligible organizations are tax-deductible. IRS Select Check on IRS.gov a searchable online tool that lists most eligible charitable organizations. Churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations even if they are not listed in this database.
Claiming Charitable Donations
Only taxpayers who itemize using Form 1040 Schedule A can claim deductions for charitable contributions. Charitable deductions are not available to individuals who choose the standard deduction or file Form 1040A or 1040EZ. Most tax software will alert taxpayers about the tax savings available if their itemized deductions, such as mortgage interest, charitable contributions, state and local taxes, exceed the standard deduction.
Monetary Donations
A bank record or a written statement from the charity is needed to prove the amount of any donation of money. Bank records include canceled checks, and bank, credit union and credit card statements. Donations of money include by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
Donating Property
For donations of clothing and other household items the deduction amount is normally limited to the item's fair market value. Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items must be in good or better condition to be tax-deductible. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.
Receipt Requirement
Donors must get a written acknowledgement from the charity for all gifts worth $250 or more, including money. For non-cash donations, it must include, among other things, a description of the items contributed. Special rules apply to cars, boats and other types of property donations.
Benefit in Return
Donors who get something in return for their donation may have to reduce their deduction. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.
Older IRA Owners Have a Different Way to Give
IRA owners, age 70½ or older, can transfer up to $100,000 per year to an eligible charity tax-free. Funds must be transferred directly by the IRA trustee to the eligible charity.
Good Records
The type of records a taxpayer needs to keep depends on the amount and type of the donation. An additional reporting form is required for many property donations and an appraisal is often required for larger donations of property.
One final note – as this column prints just before Christmas and is the last of the year, bear in mind that in order for any contribution to be deductible, it must occur on or before December 31st. This means your contribution must be delivered on or before this date, or if mailed, postmarked on or before this date. A monetary donation may be charged to a credit card and still qualify as a current year deduction as long as the charge is made before midnight New Year's Eve.
As I close 2016, my wish for you is that your Christmas season is filled with the joy and blessing of faith, family and generosity, and that you experience a very happy and prosperous new year! From my family to yours, Merry Christmas!
