The time for tax-effective charitable giving may be now. As previously mentioned, many of you may no longer have enough charitable giving to exceed the new Federal standard deduction (~$12,000 per taxpayer). So please keep in mind your donation might NOT lead to actual tax savings!
Use Your IRA First (72 and older)
Those 72 and older should be using qualified charitable distributions (QCD) from their IRA for all charitable giving or until their required minimum distribution (RMD) is exhausted for the year. This is far more tax beneficial than writing a check to your favorite charities and is our current primary focus on charitable tax planning for clients.
Farm and Business
High income businesses and farmers may be able to increase their QBI deduction (what is QBI?). Farmers should also consider using a gift of grain for maximum tax savings. Consult your GBE advisor for more details.
- For qualified charitable distributions, contact your financial advisor (if you haven’t considered GBE for investments and financial planning – please contact us today)
- If you donate using credit card in December, but payoff the statement in January, you still receive the deduction for December
- If you mail a donation in December, but the check isn’t received until January, you still receive the deduction for December
- You may NOT deduct hours of labor
Example: Mowing for 10 hours at the local church is certainly a worthy deed, but is not tax deductible
- You may NOT deduct if a benefit was received
Example: You bought a $100 gift basket at a school charity auction. If the goods inside the basket are valued at $80 then a $20 deduction is allowed. You may only deduct to the extent the amount exceeds the value received.
Documentation for Monetary Donations
For donations under $250 you must have a copy of the cancelled check or a receipt from the charity. For donations of $250 or more you must receive a written receipt from the charity, with name, date, amount, and a statement that no goods or services were provided by the charity in return for the donation.
The last month of the year is often a good time to plan final charitable contributions. The timing is helpful because you’re able to have a better estimate of income for the year compared to your donations/goals. It’s also helpful because the deduction, should you itemize, will be realized on your tax return just a few months from now.
Thanks for your time and have a great holiday season. We’ll see you soon.