Your End-of-Year Charitable Gifting Guide
With the end of another tax year and the holiday season upon us, December often brings more gifting to family, friends, your community, and often your favorite nonprofit organizations. Here are some considerations and insights to help prepare you for a discussion about your charitable gifting strategy with your advisor.
Be Mindful About What Qualifies as a Charitable Gift
It is easier than ever to make a charitable contribution to almost anyone or any cause—anywhere--through an organization’s official website. You can choose to make a one-time donation or have a monthly amount debited from your personal account. However, not all donations qualify as a charitable gift in the eyes of the Internal Revenue Service (IRS).
Often, individuals believe that helping out a friend with medical bills or donating to a group or cause through a third-party website such as GoFundMe, Kickstarter, or Snap! Raise, qualifies as a charitable gift. Unfortunately, in the eyes of the IRS, these donation collection websites are typically classified as “crowdfunding” websites, donations are not considered “charitable,” and are not tax deductible.
What Qualifies as a Charitable Organization or Tax Deductible Contribution?
Charitable organizations that qualify for tax deductible contributions are listed in Publication 78, which can be searched on the IRS Tax Exempt Organization Search tool. We recommend printing the results of your search and saving with your tax records. Contributions to certain governmental units exclusively for public purposes may also qualify. You can start your search here: https://apps.irs.gov/app/eos/
Here are some general guidelines and considerations for identifying a qualifying contribution that may be tax deductible if you itemize deductions on your personal tax forms.
- You gift something of value to a nonprofit organization. This may be cash, securities, or other tangible noncash items such as toys, winter coats, or household goods.
- For contributions other than cash, and publicly traded securities of $5,000 or more you must also obtain a qualified appraisal to include with your tax return. Work closely with your advisor and the receiving organization for these structured gifts.
- Contributions of vehicles, boats and airplanes have special rules, reach out to your advisor for these details.
Keep Detailed Records
Obtain the proper written acknowledgement for your donation, no later than January 31, 2024. For gifts up to $250 a canceled check, credit card statement, or receipt is adequate. If you gift $250 or more, you must receive an official written acknowledgement from the nonprofit organization with required language including:
- the nonprofit organization’s name,
- the amount of your cash contribution, or a description (but not the value) of your non-cash contribution,
- a statement that no goods or services were provided by the organization in return for the contribution, if that is the case,
- and a description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution.
- A Form 8283 is required for noncash contributions of $500 or more.
Limitations to Charitable Deductions
Charitable contribution deductions are subject to various limitations of your adjusted gross income. Below is a guide to serve as a general starting point. If your charitable contributions in 2023 exceed your applicable percentage limits, excess contributions may be carried forward for five tax years.
Type of Gift
Receiving 501(c)(3) Organization Type
50% (60% through 2025)
Capital Gain Property
Cash and non-appreciated property for use in of a charitable organization
Capital Gain Property
Other Tax Benefits Related to Philanthropic Activities
Other tax benefits, such as transportation costs and related expenses for volunteering are deductible, so be sure to keep detailed logs to substantiate any deductions. Noncash contributions fall into one of two categories:
- Ordinary income and short-term capital gain property. Examples include inventory, personally-created works of art, goods you have manufactured, short-term capital assets such as stock held less than one year.
- Appreciated long-term capital gain property, such as stocks, bonds, mutual funds, real estate. These assets generally allow a full, fair market value deduction in addition to avoiding capital gains tax on any gains. Donating long-term assets provides a tax-efficient way to support your favorite charities.
Ultimately, if you are charitably inclined and give regularly, aligning your charitable goals with your financial planning will amplify your gifts now and in the future. Reach out to your advisor for additional information, or you can reach out to a Redpath advisor here.
Ashley Rehn, CPA
Ashley Rehn is a director and the tax-exempt service area leader. She provides tax compliance and consulting services for a variety of exempt organizations including charities, foundations, charter schools, member organizations, business leagues, civic organizations, and social clubs. Ashley assists clients with tax planning, form 990 series preparation, and research. Specific areas of expertise include unrelated business income, private foundation compliance and excise tax reporting, entity structuring (including multiple entities and joint ventures), monitoring and analysis of public charity status, and board education. Ashley is a holder of the Not-For-Profit Certificate I issued by the AICPA. The Not-for-Profit Certificate I offers a comprehensive, foundational overview of a non-profit’s unique financial needs. Certificate holders learn to recognize applicable GAAP reporting standards, identify state and federal filing requirements, understand best practices in board governance, risk assessment, and internal controls, and are able to outline the planning steps of a successful audit engagement. She has provided public accounting services at Redpath and Company since 2007.
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