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Five Charitable Giving Mistakes

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The holiday season is one of the peak times for gift giving, not only to friends and loved ones, but also to charitable organizations. As the holidays fall within the timeframe that most are thinking about end-of-year tax planning, many people may want to write off the gifted assets. While some gifts can earn a valuable charitable contribution deduction, it is important to follow the rules associated with the tax code in order to qualify for the deduction and avoid potential tax issues. Here are five basic tips to help you plan:


  1. Make sure the organization qualifies! It is important to ensure that any organizations receiving donations for tax purposes are considered “qualifying” under federal tax law. Examples of qualifying organizations include religious organizations, most nonprofit charitable organizations, most nonprofit educational organizations, and nonprofit hospitals and medical research organizations. If you’re unsure about whether an organization is qualified, consult with IRS Publication 78.
  2. Get it in writing. A common error is making a gift of $250 or more and neglecting to obtain acknowledgment from the charity stating whether or not something of value was received in return, such as a charity dinner. If you did not receive anything, make sure the charity clearly states this and gives a description of any property donated. If you did get something in return, the acknowledgment typically must include a good-faith estimate of the value. Be sure to acquire a proper receipt by the date you file your return for the year you make the contribution. In the future, do yourself a favor and avoid hunting down receipts after the fact by obtaining one initially. For further clarification, see IRS Publication 526.
  3. You have to itemize. You cannot deduct charitable contributions unless you itemize deductions when filing taxes.  Furthermore, you can only take a deduction of up to 50% of your adjusted gross income for most charitable contributions (30% in some cases). There could be additional limitations on your ability to deduct contributions, too. For additional explanation of these and other charitable contribution rules, see IRS Publication 526.
  4. Know the value. In addition to financial contributions, you can deduct goods that are donated. To do this correctly, keep a detailed record of what was donated as well as the value of the donations. Donations of unwanted household items might be the most common example of donated goods. If you take a box of old clothes to Goodwill, you can deduct those as charitable donations. When donating household items to an organization like Goodwill or the Salvation Army, the IRS suggests that you use thrift store prices to determine the estimated value of the donation.
  5. Watch out for car trouble. Many charities would be delighted to take your unwanted cars, trucks and other types of vehicles. But if you donate a car worth more than $500 and the charity turns around and sells it, you typically can deduct only the sale proceeds. Here is an example taken directly from the IRS: Suppose you donate a car that you purchased three years ago for $9,000. A used-car guide says the car is worth $6,000, but the charity sells it for only $2,900. Typically, you could deduct only $2,900.

Since gifting can include many intricacies, please reach out with any additional questions or points of clarification. Take the time to make this year’s gift planning the most successful and meaningful yet.


For more information about charitable giving strategies post- tax reform, CLICK HERE.


wisdom wealth strategies

Andrea L. Blackwelder, CFP®, ChFC and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with Wisdom Wealth Strategies.



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