Insights: Article

It’s the Season of Giving

By Kayce Halley

December 05, 2017

It’s the season of giving—to family, friends and charities. As you give (you’re just like Santa!), there are a few things to consider from a tax perspective. We’ve got you covered with our tips below so you can stay jolly.

Contribute to qualified charities. If you’re planning on itemizing your charitable deduction on your tax return, make sure your donation goes to a qualified charity by Dec. 31. Not sure what a qualified charity is? Ask them about their tax-exempt status. Or, you can go to IRS.gov and use the Exempt Organizations Select Check tool to make sure.

If you are a taxpayer 70.5 years of age or older, you can make a donation to a charity directly from your IRA (individual retirement account, a.k.a. what you’re going to live off of when you retire). If you do this, the amount is not included on taxable income. However, that also means you can’t itemize this deduction (on your handy form known as Schedule A).

Oh, and a reminder: Gifts given to individuals, whether to friends, family or strangers, are not deductible.

Keep records of all donations. You’ll need to track any donations you’re planning on deducting, regardless of the amount. How do you do this? You can use a cancelled check, bank or credit card statement, or payroll deduction record. For contributions of $250 or more, you must receive a written acknowledgement from the charity which states the following:

  • The charity’s name
  • The date of the contribution
  • The amount of the contribution
  • Whether or not any goods or services were received in exchange for the donation

This documentation isn’t just for fun. If you’re going to itemize your deductions, you have to have the written acknowledgement from the charity prior to filing your tax return.

Give in good condition. To be tax-deductible, clothing and household goods you donate to charity generally must be in good used condition or better. So don’t try and donate your old gym socks. This includes furniture, furnishings, electronics, appliances and linens.

Here’s a little tip from us to you. It’s a good idea to take pictures of donated items for substantiation (otherwise known as proof). Also, certain non-cash donations of $5,000 or more will require an appraisal.

Did we mention records? In order to deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or written communication from the charity. So what do we mean by monetary donations? Well, checks, cash, electronic funds transfer or credit card. But it can also apply to payroll deduction. To do this, the taxpayer needs to retain a pay stub, a Form W-2 or other documentation furnished by the employer.

Keep it to 2017. Contributions are deductible in the year they were made. So if you charged it to a credit card before the end of 2017, it counts for 2017. Even if you’re not paying your bill until 2018.

You can’t be itemized and standard. For individuals, only taxpayers who itemize their deduction (on a form called Form 1040 Schedule A) can claim charitable contributions. Meaning, if you normally take standard deduction, you’re out of luck for charitable deductions.

Need help with giving-related taxes? Ask your tax professional.

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