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‘Tis Almost the Season for Gifting

‘Tis Almost the Season for Gifting

| September 18, 2017

The leaves are changing and the days are getting shorter; telltale signs the end of the year is near. As we march into the 4th quarter and look forward to celebrating the upcoming ‘season of giving’ with our friends and family, many of us start to think of ways to give back to our favorite organizations. And when you give to your favorite organization(s) you may reap some tax savings. Although this should not be the only reason to give; I want to provide some reminders of those benefits to you because when the holiday season comes to a close, tax season will begin.

What is a qualified charity or organization?

According to the IRS, a qualified organization is the following:

A foundation, trust, community chest, or corporation that is created under the laws of the United States that is operated ONLY for charitable, religious, scientific, or educational purposes. It also includes prevention of cruelty to children or animals, war veteran’s organizations, and United States/political subdivision IF used for public purposes.

What is NOT qualified for a tax deduction?

Contributions to an individual, something you received a benefit from or value of time for services you provided/personal expenses related to giving to the charity.

Ways to give:

Appreciated Securities

Besides cash, many organizations are more than happy to accept securities from donors. The benefit of this from a tax standpoint is that you can transfer the asset tax free without paying a capital gains tax, but you can also receive a tax deduction up to 30% of your adjusted gross income.

Tangible Personal Property

You may also receive a tax deduction for tangible items. There are different rules depending on the value of the item. For $250 to $500 you will need a receipt from the organization stating their name, date and location of the contribution and detailed description of the property given. For $500 to $5,000, you will need the above mentioned AND be able to provide information regarding when you received the property and the cost basis. If the contribution is over $5,000, you will need a qualified written appraisal along with the above noted requirements.

Cash, Checks, Credit Cards

Cash is one of the easiest ways to give to a qualified organization. If you itemize your deductions, you are able to deduct charitable gifts up to 50% of your adjusted gross income. Amounts given above the 50% limit can be carried forward for the next 5 years. Please remember to get an acknowledgement from the organization for your tax records.

Direct from IRA after 70 ½ up to $100k

Once you turn 70 ½, you are required to take a minimum distribution from your traditional IRA, and/or employer sponsored plan (if no longer working there). These distributions are taxed as ordinary income to you. The IRS allows you to not have to pay ordinary income on the distribution if it is given to a qualified charity, and thus this alternative may give you a larger tax deduction than what you would receive from itemizing the deduction. You will also need an acknowledgement for your records from the organization. Clearly, this option only applies for retirement accounts and individuals 70 ½ and over.

Please remember, to claim a tax deduction for this year, you must give before the last day of the year. Since taxes are a part of an overall financial plan, this topic should be discussed in greater detail with your tax advisor, CPA, or accountant. Happy giving!


The opinions voiced in this material are for general information only and are not intended to be a substitute for specific individualized tax or legal advice. I suggest that you discuss your specific situation with a qualified tax or legal advisor.