If you’ve been reading along with the 25 Days of Giving Series throughout December, thank you. If you’ve happened upon the GoFisch blog just now, welcome! I hope to see you back here often.
Giving for the sake of giving is great, however it’s financially wise to make certain your charitable donation is also beneficial in terms of your taxes.
Charitable gifts are defined by the IRS, at least for the purpose of qualifying for a charitable deduction from federal income tax. A review of statutes and caselaw show that the IRS attributes several major characteristics to charitable gifts:
Charitable intent
There must be a clear and unmistakable intention on the part of the donor to absolutely and irrevocably to divest herself of both title and control of the property.
Irrevocable transfer
The irrevocable transfer of the present legal title and dominion and control of the entire gift to the charity so that the donor can exercise no further act of dominion and control over it.
Delivery
The donor must deliver the gift to the charity. (Delivery can be made through a number of ways. This could be hand-delivered, like dropping off a check. It could also mean a secure electronic payment made on the charity’s website. In the case of charitable gifts of grain this could mean physically delivering the grain to a specific silo.)
Acceptance
The charity must accept the gift. For instance, you may want to donate part of your modern art collection to your favorite nonprofit, but if the nonprofit doesn’t have the resources to accept or doesn’t want the collection for some reason, it’s not a charitable gift.
Qualified organization
The donee must be an organization recognized as charitable by the IRS. You can use this IRS online search tool for organizations to see if the charity you’re considering donating to is recognized as tax-exempt.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/05/joanna-kosinska-392327.jpg40166016Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-11 08:13:022020-05-18 11:28:4125 Days of Giving: Charitable Gifts Defined
Thanks for the reading the 25 Days of Giving series! Each day through December 25, I’m covering different aspects of charitable giving for both donors and nonprofit leaders. Have a topic you want to be covered or questions you want answered regarding charitable giving? Contact me.
The vast majority of public and private universities and colleges are tax-exempt entities as defined by Internal Revenue Code (IRC) Section 501(c)(3) because of their educational purposes and/or the fact that they are state governmental entities. If this is the case, have you ever wondered why tuition for a student to attend a university is not deductible as a charitable contribution? This is known in gift law as as a “personal benefit” transfer. The personal benefit of education for the student is equal to the tuition paid. Because of the benefit value, there is no charitable gift and therefore no federal income tax charitable contribution deduction.
Another example of personal benefit transfer would be payment to a charity for specific services, and such payments are not deductible. In Hernandez v. Commissioner, the U.S. Supreme Court determined gifts of fixed amounts to the Church of Scientology (a tax-exempt religious organization) in exchange for personal counseling were not deductible. The Court held that such “gifts” were more appropriately considered payments for services rather than charitable contributions.
If you ever have a question if a charitable gift is tax deductible, don’t hesitate to contact me. It never hurts to get a second opinion on potential personal benefit situations, especially if the opinion can mean potentially avoiding an IRS audit.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/05/freestocks-org-475745.jpg37995698Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-10 23:11:232020-05-18 11:28:4125 Days of Giving: What the Personal Benefit Transfer Means for Charitable Contributions
Passed in 2017, the Tax Cuts and Jobs Act ushered in many changes, including an increase in the standard deduction. The deduction for single filers is now $12,200 and $24,400 if you are a married joint-filer. In reality, this means that the number of households claiming the itemized deduction (including their exempt charitable donations) is much less compared with previous tax schemes. But, fear not. There are strategies to clear the initial standard deduction threshold.
What the Heck is Bunching?
One of the major options available to charitable donors is to “bunch” donations. To bunch donations you make larger charitable donations this year in a way that exceeds the standard deduction and then smaller ones next year to compensate. Depending on your charitable giving capacity and goals, this means you could alternate every other year or every few years.
By way of example, instead of giving you “normal” $5,000 to charity annually, consider accelerating your gift two years worth of donations in 1 year. So you would end up giving $10,000 every two years. The $10,000 is the same amount you planned to give over the two years but strategically donated in a way that maximizes itemized tax benefits. With this option, you may claim your itemized deductions over the limit one year and then take the standard deduction the next.
If you’re considering bunching donations, you may want to do so through a donor-advised fund (or DAF), which offers a unique level of donative flexibility. The DAF allows you to make charitable contributions and receive an immediate tax break for the full donation, even though you can choose to recommend grants to your fave nonprofits from the fund at a later date and over time.
Questions about bunching or how to maximize your charitable donations under current federal and state tax laws? Don’t hesitate to contact me for a free one-hour consultation!
https://www.gordonfischerlawfirm.com/wp-content/uploads/2018/12/Screen-Shot-2018-12-24-at-10.54.52-PM.png6701046Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-09 21:35:522020-05-18 11:28:4125 Days of Giving: Donation Bunching
25 Days of Giving: Charitable Gifts Defined
Charitable Giving, Taxes & FinanceIf you’ve been reading along with the 25 Days of Giving Series throughout December, thank you. If you’ve happened upon the GoFisch blog just now, welcome! I hope to see you back here often.
Giving for the sake of giving is great, however it’s financially wise to make certain your charitable donation is also beneficial in terms of your taxes.
Charitable gifts are defined by the IRS, at least for the purpose of qualifying for a charitable deduction from federal income tax. A review of statutes and caselaw show that the IRS attributes several major characteristics to charitable gifts:
Charitable intent
There must be a clear and unmistakable intention on the part of the donor to absolutely and irrevocably to divest herself of both title and control of the property.
Irrevocable transfer
The irrevocable transfer of the present legal title and dominion and control of the entire gift to the charity so that the donor can exercise no further act of dominion and control over it.
Delivery
The donor must deliver the gift to the charity. (Delivery can be made through a number of ways. This could be hand-delivered, like dropping off a check. It could also mean a secure electronic payment made on the charity’s website. In the case of charitable gifts of grain this could mean physically delivering the grain to a specific silo.)
Acceptance
The charity must accept the gift. For instance, you may want to donate part of your modern art collection to your favorite nonprofit, but if the nonprofit doesn’t have the resources to accept or doesn’t want the collection for some reason, it’s not a charitable gift.
Qualified organization
The donee must be an organization recognized as charitable by the IRS. You can use this IRS online search tool for organizations to see if the charity you’re considering donating to is recognized as tax-exempt.
Want to be sure your charitable gift is indeed a tax deductible charitable gift in the eyes of the IRS? What about charitable gifts or life insurance or a retained life estate? It certainly doesn’t hurt to take me up on my offer for a free one-hour consultation. Give me a call at 515-371-6077 or shoot me an email at gordon@gordonfischerlawfirm.com.
25 Days of Giving: What the Personal Benefit Transfer Means for Charitable Contributions
Charitable Giving, Taxes & FinanceThanks for the reading the 25 Days of Giving series! Each day through December 25, I’m covering different aspects of charitable giving for both donors and nonprofit leaders. Have a topic you want to be covered or questions you want answered regarding charitable giving? Contact me.
The vast majority of public and private universities and colleges are tax-exempt entities as defined by Internal Revenue Code (IRC) Section 501(c)(3) because of their educational purposes and/or the fact that they are state governmental entities. If this is the case, have you ever wondered why tuition for a student to attend a university is not deductible as a charitable contribution? This is known in gift law as as a “personal benefit” transfer. The personal benefit of education for the student is equal to the tuition paid. Because of the benefit value, there is no charitable gift and therefore no federal income tax charitable contribution deduction.
Another example of personal benefit transfer would be payment to a charity for specific services, and such payments are not deductible. In Hernandez v. Commissioner, the U.S. Supreme Court determined gifts of fixed amounts to the Church of Scientology (a tax-exempt religious organization) in exchange for personal counseling were not deductible. The Court held that such “gifts” were more appropriately considered payments for services rather than charitable contributions.
If you ever have a question if a charitable gift is tax deductible, don’t hesitate to contact me. It never hurts to get a second opinion on potential personal benefit situations, especially if the opinion can mean potentially avoiding an IRS audit.
25 Days of Giving: Donation Bunching
Charitable GivingPassed in 2017, the Tax Cuts and Jobs Act ushered in many changes, including an increase in the standard deduction. The deduction for single filers is now $12,200 and $24,400 if you are a married joint-filer. In reality, this means that the number of households claiming the itemized deduction (including their exempt charitable donations) is much less compared with previous tax schemes. But, fear not. There are strategies to clear the initial standard deduction threshold.
What the Heck is Bunching?
One of the major options available to charitable donors is to “bunch” donations. To bunch donations you make larger charitable donations this year in a way that exceeds the standard deduction and then smaller ones next year to compensate. Depending on your charitable giving capacity and goals, this means you could alternate every other year or every few years.
Reminder, substantiated donations to a qualified nonprofit can be combined with mortgage interest and state/property taxes when calculating excess above the standard deduction limit. (The Greater Kansas City Community Foundation created a useful illustrated chart of this concept.
Bunching in Practice
By way of example, instead of giving you “normal” $5,000 to charity annually, consider accelerating your gift two years worth of donations in 1 year. So you would end up giving $10,000 every two years. The $10,000 is the same amount you planned to give over the two years but strategically donated in a way that maximizes itemized tax benefits. With this option, you may claim your itemized deductions over the limit one year and then take the standard deduction the next.
Donor-Advised Fund
If you’re considering bunching donations, you may want to do so through a donor-advised fund (or DAF), which offers a unique level of donative flexibility. The DAF allows you to make charitable contributions and receive an immediate tax break for the full donation, even though you can choose to recommend grants to your fave nonprofits from the fund at a later date and over time.
Questions about bunching or how to maximize your charitable donations under current federal and state tax laws? Don’t hesitate to contact me for a free one-hour consultation!