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IRS Help for Charitable Taxpayers
[By Children’s Home Society of Florida Foundation]
The IRS has published a series of six tips that are designed to help charitable taxpayers. Both the Department of the Treasury and the IRS hope to enable donors to support various charities. The six recommendations will help donors to be certain that their gifts are deductible.
1. Tax Exempt Status
A charity must be qualified under the IRS guidelines for a gift to be deductible. At www.irs.gov there is an “Exempt Organization Select Check” that allows donors to be certain the charity is qualified to receive deductible gifts.
2. Itemizing
Your charitable gifts are deductible only if you itemize deductions on IRS Form 1040, Schedule A.
3. Fair Market Value
Gifts of cash are deductible at face value. Gifts of appreciated stock, land and many other types of property are often deductible at fair market value. There are special rules for cars, boats, clothing and household items. If the charity gives value in return, such as goods, services, admission to a charity banquet or sporting event, that amount will reduce the value of your charitable deduction.
4. Good Records
You need to maintain records of all donations. All cash gifts must be documented even if they are quite small. You should keep cancelled checks, bank or credit card statements, payroll deductions or a statement from the charity with its name, contribution, date and amount for your gifts.
5. Larger Gifts
If your gift is $250 and above, you must receive a receipt or written acknowledgement from the charity. The acknowledgement should state the amount of the gift and may include a description and fair market value for property gifts. It must state whether the charity provided goods or services for your gift. Non-cash gifts over $500 require you to file IRS Form 8283, Non-Cash Charitable Contributions, with your Form 1040. If the non-cash property is over $5,000 and is not a public stock, bond or mutual fund, you usually must obtain a property appraisal from a qualified appraiser who holds himself or herself out to the public for that purpose. In some cases, the appraisal must be attached to the return with a signed Form 8283.
6. Timing
If you make a pledge, the gift will be deductible only when it actually is made. For example, a donor may make a pledge in November and then make the gift the following March. The gift is deductible in the year it is made. End-of-year donations by check or credit card are generally deductible in the year that they are made or placed in the U.S. mail.
Editor’s Note: In nearly all cases, your charitable gifts will qualify for a substantial reduction in your taxes. For specific information, go to www.irs.gov and search for IRS Publication 526, Charitable Contributions. Valuation rules are available in IRS Publication 561, Determining the Value of Donated Property.
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Filed under: Estate Planning, Taxation | Tagged: 8283, gifts, IRS, IRS Form 8283, IRS Tips for Charity Minded Medical Professionals, Non-Cash Charitable Contributions, Schedule A |
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Charitable Contributions
[A Review of Gift Tax Reporting Essentials]
Authority Conrad Teitell gives an outline of the gift-tax implications of charitable gifts in this article.
http://wealthmanagement.com/blog/charitable-contributions-gift-tax-reporting-essentials?NL=WM-07&Issue=WM-07_20120829_WM-07_373&YM_RID=marcinkoadvisors%40msn.com&YM_MID=1336193
Edmund
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Tips for Donating Appreciated Assets
Contributing appreciated holdings to charity can be a tax-efficient strategy.
http://www.financial-planning.com/30-days-30-ways/skip-the-cash-tips-for-donating-appreciated-assets-2690960-1.html?utm_campaign=30%20days%2030%20ways-nov%201%202014&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae3274390%3A86235a%3A&st=email
Dorothy
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New Tax Rules for Donating Cars & Boats
According to KATIE KUEHNER-HEBERT, recent changes in IRS rules have made the paperwork more onerous and the tax breaks less generous.
http://www.financial-planning.com/30-days-30-ways/new-tax-rules-for-donating-cars-and-boats-2691215-1.html?utm_campaign=30%20days%2030%20ways-nov%2023%202014&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae3379145%3A86235a%3A&st=email
Advisors should examine clients’ reasons for giving, and make sure they act well before year-end. Doctors should be aware, too.
Warren
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Beware – The Wall Street Takeover of Charity?
According to Jesse Eisinger of ProPublica, the rise of donor-advised funds is helping financial firms … but hurting society.
http://www.propublica.org/thetrade/item/the-wall-street-takeover-of-charity?utm_source=et&utm_medium=email&utm_campaign=dailynewsletter&utm_content=&utm_name=
Ward
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On Mark Zuckerberg
You may have read that Facebook founder, chairman, and CEO Mark Zuckerberg has announced plans to gift substantially all of his Facebook stock to a philanthropic company called the Chan Zuckerberg Initiative, named after himself and his wife Priscilla Chan.
The gift would be made by the end of his lifetime, which, since Zuckerberg is 31, gives him a long time to dispose of his shares. He is limited by the SEC to not selling or giving away annually more than $1 billion in Facebook shares over the next three years. Zuckerberg says in his Facebook posting that he will “continue to serve as Facebook’s CEO for many, many years to come.” This would indicate he probably intends on keeping enough of a majority in the company to maintain control for a long time.
If the company maintains its current pricing (it is currently worth $45 billion), this gift could become one of the largest philanthropic pools in the world. According to his Facebook page, the purpose of the Chan Zuckerberg Initiative will focus on “personalized learning, curing disease, connecting people and building strong communities.”
Zuckerberg set up a limited liability company (LLC) to receive the shares rather than a charitable trust or foundation. This gives him much more control over how the money is spent than he would have over a traditional charity. Unlike a charity, the Initiative will be able to invest in for-profit companies, fund PACs, and hire lobbyists.
While giving his shares to an LLC rather than a charity will give Zuckerberg a lot more freedom in how he spends the money, his gift is not completely tax-efficient. I have read a number of accusations that setting up the LLC is simply a tax dodge and a way for Zuckerberg to avoid paying capital gains, estate and income taxes on his wealth. He contends that he and his wife would get no tax benefit from the gift and “Just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.”
I am not clear on all the potential tax benefits of this arrangement, of course. I do know that, had Zuckerberg decided to give his shares to a charity, similar to the gifts made by Warren Buffett and Bill Gates, he would receive a charitable contribution deduction on Schedule A of his Form 1040. The amount of the deduction would be based on the fair market value of the shares. That would shelter billions of dollars of future dividend income, when and if Facebook ever pays a dividend. At the same time, he would completely avoid having to pay capital gains taxes on the appreciation of those shares.
Of course, there is a price to pay for all the tax benefits of such a gift: the donor no longer owns his shares. That value is wiped out of his net worth.
Zuckerberg appears to be damned by some either way he goes. It appears to me he wants to use his money to support causes he believes in. Had he decided not to set up the philanthropic company, he could still donate to any cause he wants, taking any resulting tax breaks and paying any resulting taxes. Whatever tax savings he may incur just means there is more money available to support those causes.
This time of year, many doctors and other people donate to charities. Taking tax deductions for those gifts certainly does not taint or reduce their generosity. The intention of tax breaks on charitable donations is to encourage giving, as well as to allow charities to receive a bigger pool of money.
Rick Kahler MS CFP®
http://www.KahlerFinancial.com
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