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Making Charitable Gifts Without Giving Away Big Tax Breaks


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6/3/2018
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Making Charitable Gifts Without Giving Away Big Tax Breaks

You need to be careful when you are making a charitable gift.  Especially with the newly passed Tax Cuts & Jobs Act (“TC&JA” or “Tax Law”).

What’s New?

First, what’s new for charitable gifts under the new Tax Law?  There is a new provision for a “Qualified Charitable Distribution” (“QCD”) which allows anyone aged 70.5 or older to donate money from their IRA directly, without it being counted as income.  As most people familiar with the issue know, IRA’s have a Required Minimum Distribution (“RMD”) which must be taken on an annual basis.  The QCD reduces both RMDs and the taxpayer’s Adjusted Gross Income (“AGI”).

What’s Old is New Again…

When making charitable donations, be sure to get receipts and matching bank records.  The best practice is to obtain a letter from the qualifying organization together with a bank record of the payment.  The record must include the name of the organization, date and amount contributed.

A lot of organizations like to throw galas, balls, golf outings and the like.  The deduction is limited by the fair market value of the benefit received, which can be computed by admission tickets or comparables—so don’t be fooled into thinking that making a $1,000 “contribution” for $1,000 seats at a ballgame will be honored by the IRS—because they will see this as simply a “substance over form” situation where you call the deduction one thing, but it is really something else altogether.

For noncash contributions over $250 you need to keep a written record and acknowledgment of the donation.  Goodwill provides these for each donation, for example.  The receipt is required to make a good faith approximation of the value of the donated items.

Noncash donations over $500 require that the taxpayer fill out Form 8283, and failure to complete the form is likely to result in the deduction being disallowed.



Category: Tax Law


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