Contact Us
Firm Overview
Why Legend Is Different
Client Types
Professional Biographies
Frequently & Rarely Asked Questions
Risk Spectrum
Investment Strategies
Second Opinion
Global Investment Pulse
Event Calendar
Press Center
Legend News
Clients Only
Career Opportunities
Directions
Newsletter Sign-up
Site Search
Site Map
Home
Tell A Friend About This Website
 
 
 
Financial Briefs

 

Phone: (412) 635-9210
  (888) 236-5960
Connect With Legend:
Subscribe to me on YouTube

Know The Tax Rules On Charitable Gift Deductions


Cleaning out your closet could be a great way to cut your tax bill and be philanthropic at the same time. If you itemize deductions, you can write off charitable contributions of as much as 50% of this year’s adjusted gross income, and if you exceed that amount, you can carry over the remainder for future tax years. You get the same benefits as an owner of a partnership, limited liability company, or S corporation when the business donates property to eligible charities. And a C corporation can take charitable deductions on its own tax return.

Still, Internal Revenue Service rules governing gifts of tangible personal property—anything you can see, touch, or feel, excluding land or a building—are complex, as a reading of Publication 526 quickly reveals. And you must keep copious records. With the IRS expanding its staff of auditors, it’s important to know the requirements and follow them carefully.

The size of your deduction depends on myriad factors, such as whether the donated property is worth less now than when new—usually the case for a late model used car, for example, and most clothing. With such gifts, you can generally deduct the item’s fair market value, or street value. Websites like autos.yahoo.com can help you approximate what a car is worth, taking into account its age and condition; for clothing, the fair market price might be what you’d get selling to a thrift shop. For donations of household items, a deduction is allowed only if the item is in good condition.

When you give away non-business property that has appreciated, you may deduct its fair market value as long as you have owned the property for more than a year and the charity anticipates using it in a way related to its tax-exempt purpose. For instance, you qualify if an art museum accepts your artwork and agrees to display it. A big advantage of giving away appreciated collectibles such as fine art, vintage wines, and guitars signed by the Beatles, is that your profit from selling them would be taxed at 28%. That’s almost double the 15% rate that applies to most capital gains.

You won’t make out nearly as well with gifts of appreciated business property or if the charity plans to sell your donation. In such instances, you can usually deduct only the asset’s basis. For business property, such as outdated computers, that’s the original cost minus depreciation write-offs you’ve taken. For personal assets you’ve inherited, it’s what the gift is worth on the day the executor values the estate—either the date of death or six months later. For a gift you’ve received, the basis is what the original owner paid. So if your great aunt gives you a white mink coat she bought in 1958 for $250, that’s all you’re entitled to deduct if you donate the fur for auction at a church fair, even if the coat fetches more.

For every non-cash gift, you’ll need a receipt or acknowledgment from the charity showing the date and location of the donation and a reasonably-detailed description of the gift. For gifts of $250 or more, the charity’s written acknowledgment must also say whether you received goods or services in return.

In addition, you must keep your own written records, including the terms of any conditions attached to your gift and how you figured your deduction. Deductions of more than $500 require you to substantiate how and when you obtained the donated property, and your basis in it. If that’s not available, you must explain why in an attachment to your tax return in order to get the deduction.

If you deduct more than $5,000 for a single donated item or group of similar items, such as a coin collection, you’ll need a written appraisal and the qualified appraiser’s signature on IRS Form 8283, which you must file with your tax return. Someone from the organization that received your gift must also sign the form and indicate whether the charity intends to put the property to an unrelated use.

So give, and your magnanimity will be rewarded—as long as you keep good records and don’t overestimate the value of your generosity.

 


This article was written by a professional financial journalist for Legend Financial Advisors, Inc. and is not intended as legal or investment advice.



INDEX
  • Getting A High Tax Grade For Higher Education Credits
  • How Social Earnings Taxation Has Changed
  • Why Aren't More Millennials Moving On Up And Out?
  • Taking Socially Responsible Investing To The Next Level
  • Don't Be Caught Red-Handed By The Wash Sale Rule
  • Leading Economic Indicators Hit 10-Year High
  • Avoid These 6 Mistakes In Stretch IRA Planning
  • More Flexibility Allowed In Flex Spending Accounts
  • Individual Bonds-Ugh!
  • Set Aside The Funds One Might Need For A Rainy Day
  • Protect Against Possible Terrorist Attack
  • U.S. Leading Economic Indicators Rose Again
  • Fed Chair Strikes A More Cautious Tone, But Still Expects Moderate Growth
  • Count Off 3 Tax Breaks For Higher Education
  • Don't Be Victimized By These 10 Common Scams
  • Retirement Plan Choices For The Self-Employed
  • New Law Says Tax Debtors May Lose Their Passports
  • Compare Minor's Account To 529 Plan
  • Are You Being Socially Responsible?
  • 8 Smart Moves For College Grads
  • Seeking Financial Aid: Don't Fear The FAFSA
  • New Baby? Consider An Education Savings Plan
  • HOW THE IRS RESOLVES AN IDENTITY THEFT CASE:
  • 3 Ways To Deduct Mortgage Interest
  • HOW THE IRS RESOLVES AN IDENTITY THEFT CASE
  • Understanding Deflation
  • Don't Play Up Super Bowl Outcome In Stock Decisions
  • When Should Millennials Start Retirement Saving?
  • Have Your Child Kick Into A Roth With A Reward To Boot
  • Sizing Up The Energy Boost To The Economy
  • A Stock Plunge Amid Strong Economic Data
  • 14 Top Year-End Tax Moves For Individuals In 2014
  • Drill Down For Three Key Oil And Gas Tax Breaks
  • When It Pays To ID Security Sales
  • GDP Growth Data Masks Strength Of The Recovery
  • Be On The Lookout For Crimes Involving An Elder Fraud
  • UNDERPERFORMANCE/OVERPERFORMANCE
  • S&P 500's New All Time High Wednesday Will Probably Continue Over Upcoming Months, But Other Indexes Are Struggling
  • U.S. Stock valuations are within the top 10 valuations of all time but probably won't crash. Why?
  • Seven Steps To Digging Your Way Out Of Deep Debt
  • 5 Steps To Protect The Digital Assets You Own
  • The Long-Term Fiscal Status Of The United States
  • Margin Debt At Record Levels
  • What To Do When You're Suddenly Widowed
  • A Common Error In Powers Of Attorney
  • Should You Move To A Different State?
  • Tax Cost Of Being Your Own Landlord
  • Why Do GRATs Remain In Such High Demand?
  • Don't Wait To Harvest Your Losses
  • The Best States To Move To For Tax Purposes
  • 10 Reasons For The IRS To Flag Your Return
  • Many Women Face Special Challenges As Retirement Nears
  • Nine Reasons To Consolidate Debt
  • Straight Talk About Living Trusts
  • SEPPs From An IRA: Don't Change Horses Midstream
  • New Regulations Fill In Gaps On 3.8% Surtax
  • Do You Know Life Insurance Basics?
  • Top Income-Earners Drive U.S. Economic Growth
  • Give IRA Cash To Charity: Heads You Win, Tails You Win
  • Four Wash Sale Strategies To Help Clean Up Taxes
  • College Savings: How Much Do You Need Each Month?
  • Surprising New Research: Large Caps Top Small Caps
  • Newly Widowed Face 401(k), IRA Options
  • Retirement Saving Takes Time And Must Be A Priority
  • Divide-Conquer To Convert To Roth IRA
  • What Is Probate And What Does It Protect?
  • A Research Surprise On Bond Funds
  • After New Tax Law, Do You Still Need A Bypass Trust?
  • Start Estate Planning For Your Child Now
  • Seven Tax Ideas To Use Throughout The Year
  • A Comprehensive Way To Plan For College Savings
  • Bulletproofing Your Will Before Death
  • IRS Mercy on 60-Day IRA Rollover Error
  • Feds Warn Of Life Settlement Dangers
  • Know The Tax Rules On Charitable Gift Deductions
  • IRS Ruling Boosts IDTs as Estate Planning Technique
  • A Defined Benefit Plan Lets You Sock Away Large Amounts If You Can Overcome Some Obstacles
  • Economic Shifts Bring New Pitfalls And Prizes
  • Evaluating Great Companies
  • Inflation Versus Deflation
  • Jeremy Grantham And Lou Stanasolovich Discuss Market Valuations
  • Ramifications Of A Weakening Dollar
  • Secular Versus Cyclical Bear Markets
  • Small Business And Work Opportunity Tax Act
  • Time To Plan For Estates, Wills, & Trusts



  • ©2017 Legend Financial Advisors, Inc.®. All rights reserved.