As we approach the end of the year and the holiday season, we seem to be bombarded with opportunities for charitable giving. Happily, many of us answer this call and donate generously to our favorite charitable organizations. Your generosity may also be beneficial at tax time if you remember a few IRS guidelines for charitable contributions:
- You must itemize deductions on Schedule A to deduct a charitable contribution.
- Donate before year-end to claim a deduction. Please remember if you are making a stock donation to submit the request a few weeks before the end of the year as this will allow your custodian enough time to fulfill the request in time for the deadline.
- Verify that the charity is tax-exempt (sometimes called 501 (c) (3) organizations) or qualified. Most organizations, other than churches and governments, must apply to the IRS to become a qualified organization. More information about qualified organizations can be found in IRS Publication 526, Charitable Contributions. You can also verify the tax-exempt status of an organization on the IRS.gov website.
- When making your donation of cash or goods be sure to get a receipt. The IRS requires a receipt for donations greater than $250.
- For donated property with a value of more than $5,000, you’re generally required to obtain a qualified appraisal and to attach an appraisal summary to the tax return. However, a qualified appraisal isn’t required for publicly traded securities for which market quotations are readily available. A partially completed appraisal summary and the maintenance of certain records are required for (1) stock that isn’t publicly traded and for which claimed deduction is greater than $5,000 and no more than $10,000, and (2) certain publicly traded securities for which market quotations aren’t readily available.
- For gifts of art valued at $20,000 or more, you must attach a complete copy of the signed appraisal (rather than an appraisal summary) to your return. IRS may also request that you provide a photograph.
- If you are giving a large donation and the contribution is to a “50% limit organization” (generally speaking most are), the deduction, if cash, is limited to 60% of your adjusted gross income (AGI). Non-cash contributions to a “50% limit organization” are, generally speaking, limited to 50% of AGI reduced by cash 60% contributions. When planning a large gift, talk to your tax professional to develop the most beneficial giving strategy.
- Lastly, many employers will match gifts made by their employees so remember to check your company policy and do twice as much good!
Larry Harris, CPA, CFP®, PFS
Director of Tax Services