Many people procrastinate to the end of December in making charitable gifts. As midnight on December 31st looms, your GBE advisors have been known to receive calls from anxious clients questioning how to make year-end gifts to their favorite charities and be assured of receiving their income tax charitable deduction in the current year. Here are some frequently asked questions we’ve received:
Q. I’m mailing a check to a charity. Does the charity have to receive my check this year to get my charitable deduction?
A. That depends. Mailing via US Postal Service – Under the “mailbox rule,” if you are mailing the check via the US Postal Service the postmark date will be the gift date. The same is true if you are using the US Postal Service for overnight delivery.
Private delivery service – If you are using a private delivery service such as FedEx or UPS, the date the check arrives at the charity is the gift date.
Client Tip – A gift made late in the year should be mailed through the post office, certified or registered mail, return receipt may be requested to establish the delivery date. Merely depositing the envelope in a mailbox or dropping off after post office closing hours on December 31st will result in a gift that cannot be deducted until the new tax year.
Q. There’s no time to mail my check, so I’m going to deliver the check at the charity’s office. Can I take my charitable deduction this year?
A. If you deliver the check to the charity on or before December 31st, you can take your charitable deduction this year.
Client Tip – If you are delivering a check to the charity on or before December 31st, do it during business hours and have someone sign and date when the check was received.
Q. I’m making a gift online to charity using my credit card. If I make the gift on or before December 31st, do I get my charitable deduction this year?
A. Not necessarily. Gifts to charity using a credit card are complete on the transaction posting date. That is the date on the statement showing the name of the charity and when the charge was posted to the cardholder’s account. That could be a day or a few days after the donor initiates the gift, which could extend into the new tax year.
Client Tip – If you are gifting online via credit card give yourself at least three days of leeway and make the gift by December 28th.
Q. It’s December 30th and I’ve instructed my brokerage company to transfer stock (or mutual funds) to charity. Will I get my charitable deduction this year?
A. It depends. When stock or mutual funds are transferred electronically, the gift is complete on the date the shares arrive in the charity’s account. That becomes the gift date. At year-end many brokerage companies are overwhelmed with transactions. Transfers can be delayed such that the shares arrive in the charity’s account in the new tax year.
Q. I’m making a significant gift to a favorite charity this year. Can I use the entire charitable deduction this year, or are there limits to how much I can use? If I can’t use the entire deduction, will I forfeit my deduction?
A. Deductibility is governed by what is commonly referred to as the “30/50 rule.” If you are making gifts of cash to a public charity, you can use the charitable deduction up to 50% of your adjusted gross income in the year of the gift. If you are giving appreciated securities that qualify for long-term capital gain treatment, you can use the charitable deduction up to 30% of your adjusted gross income in the year of the gift. In both cases, if you have any unused charitable deduction you can carry the unused deduction forward for up to the next five tax years, subject to the same 30% or 50% limitation of adjusted gross income each year.