There are many tax tactics to keep in mind for preparing next year’s return. Starting well in advance of the tax filing deadline is simply a prudent thing to do. But rules for charitable giving are confusing and you must be careful before entering that deduction. Here’s some things to think about regarding Charitable Giving: recent changes made by IRS, sorting through the maze of IRS rules and knowing who you can make donations to.
Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.
Contributing to charities comes with a load of tax rules. Here’s are a few things to think about:
What kind of donation will you make this year? The maximum you can deduct depends on whether you donate cash or property and on the type of charity as defined by the Internal Revenue Service:
In most years, any donation generally maxed out at 50% of your yearly income minus deductions, or adjusted gross income (AGI). And deductions for donations to certain groups such as veterans’ organizations, fraternal societies, nonprofit cemeteries and others often maxed out at 30% of your AGI.
But guess what? The IRS put a temporary limit on charitable contributions (and this is expected to change yet again, so be careful before you donate).
Taken directly from the IRS website:
“In most cases, the amount of charitable cash contributions taxpayers can deduct on Schedule A as an itemized deduction is limited to a percentage (usually 60 percent) of the taxpayer’s adjusted gross income (AGI). Qualified contributions are not subject to this limitation. Individuals may deduct qualified contributions of up to 100 percent of their adjusted gross income. A corporation may deduct qualified contributions of up to 25 percent of its taxable income. Contributions that exceed that amount can carry over to the next tax year. To qualify, the contribution must be:
Contributions of non-cash property do not qualify for this relief. Taxpayers may still claim non-cash contributions as a deduction, subject to the normal limits.”
To whom do you want to donate? The IRS requires that you give to a qualified organization in the U.S. to claim a deduction. An organization’s merely claiming tax-exempt status doesn’t automatically make your donation deductible.
Many major charities fit the criteria, but double-check that your organization of choice makes the list. The IRS offers a search tool to look for qualifying organizations.
Learn what you may not know. You can never deduct some donations, for example, such as Bibles, gifts to individuals and donations to political parties or candidates. Services provided are also not deductible.
For deductible cash donations, the IRS requires standard documentation of a bank record, payroll deduction or written communication from the qualified organization. This communication must include the name of organization and the date and amount of contribution regardless of the amount donated.
For all donations (cash and property) more than $250, you must show the above documentation, plus a written acknowledgement of the donation’s amount and whether any portion of the donation was in exchange for goods or services.
These few reminders only skim the surface of charitable giving. Best to check with your financial advisor before you give until it hurts.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results or even estimates of actual returns a client may achieve. This information is designed to provide general information on the subjects covered. Consult your financial professional before making any investment decision. Opinions and estimates offered are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. Please see other important disclosures related to StrongValley.com
You are now leaving the Strong Valley Wealth & Pension, LLC ("Strong Valley") website. By clicking on the "Schwab Alliance Access" link below you will be entering the Charles Schwab & Co., Inc. (“Schwab”) Website. Schwab is a registered broker-dealer, and is not affiliated with Strong Valley or any advisor(s) whose name(s) appears on this Website. Strong Valley is/are independently owned and operated. Schwab neither endorses nor recommends Strong Valley. Regardless of any referral or recommendation, Schwab does not endorse or recommend the investment strategy of any advisor. Schwab has agreements with Strong Valley under which Schwab provides Strong Valley with services related to your account. Schwab does not review the Strong Valley website(s), and makes no representation regarding the content of the Website(s). The information contained in the Strong Valley website should not be considered to be either a recommendation by Schwab or a solicitation of any offer to purchase or sell any securities.