Thanks for reading the 25 Days of Giving series! Share with friends, family, & colleagues to inspire others to also make meaningful year end gifts this season…and plan ahead for 2020 charitable goals.
Under the current tax code, you may have changed the ways in which you give or the tax-beneficial strategies you employ with your charitable giving as compared to previous tax laws. What hasn’t changed, is that you may choose to deduct from your federal income tax any charitable contributions of money or property made to qualified organizations if you itemize your deductions. But, there are record keeping requirements you’ll want to stay on top of, so you’re not scrambling during tax time!
Payroll deduction substantiation
Making a charitable deduction directly from your paycheck is a great and steadfast way to be sure to meet your charitable giving goals. For charitable contributions made via payroll deductions, the donor needs two documents to substantiate the gift:
a pay stub, W-2, or other document furnished by the employer that sets forth the amount withheld from the taxpayer during a taxable year by the employer for the purpose of contributing to a charity;
a pledge card or other document prepared by or at the direction of the charity that shows the name of the charity.
Donors who give to a local United Way or other organizations that funnel contributions to other charities need to only obtain the pledge card or other document from the United Way and not from the affiliated charities which ultimately receive the money.
Tax law requires that for any contribution of $250 or more, the taxpayer must substantiate the contribution by a contemporaneous written acknowledgement of the contribution by the charity. For payroll deductions, the contribution amount withheld from each payment of wages to a taxpayer is treated as a separate contribution for purposes of the $250 threshold.
So, for example, a taxpayer who gave $300 over the course of a year through payroll deductions, $30 per paycheck over ten paychecks, would not trigger the $250 substantiation requirement. The substantiation requirement would only kick in if $250 or more is withheld from each paycheck.
If any of this is confusing, know you don’t have to navigate these requirements just by yourself. Contact me at any time to discuss your situation and charitable giving goals. We’ll figure out the best course of action together!
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/04/guilherme-stecanella-465088.jpg36485472Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-23 15:38:382020-05-18 11:28:3825 Days of Giving: Substantiation Requirements of Charitable Gifts made by Payroll Deduction
If you choose to itemize your taxes, charitable contributions can reduce your tax bill. Generally you would choose to itemize when the combined total of your anticipated deductions (like charitable gifts) add up to more than the standard deduction. For 2019 taxes the standard deductions are:
$12,200 for single individuals
$12,200 for married, filing separately
$24,400 for married filing jointly
$18,350 for head of household
If you do choose to itemize, limits on federal income tax charitable deductions are quite high, but they do exist. Keep this in mind as you make any year-end donations. The specific limitations are complicated, and there are numerous exceptions. The limits are based on your AGI (adjusted gross income). AGI is an individual’s total gross income minus specific deductions.
A quick rule-of-thumb for different types of donated assets to public charities:
Appreciated capital gains assets (such as stock) up to 20% of AGI
You can deduct transportation costs and other expenses related to volunteering
Note that these rates are for public tax-exempt organization and private operating foundations. Contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are limited to 30% adjusted gross income. (Check out these IRS status codes and deductible limits if you’re unsure of an organization’s limit.)
As I mentioned, most people won’t exceed these limits indicated above, but it can happen. For instance, if Jane Donor is a retiree living off of savings and donates more than her investments yield over the year, her limit could be exceeded. The good news is that in this case the IRS allows you carry over excess contributions for up to five following tax years.
Don’t forget to take these steps if you plan to itemize your charitable deductions:
Make sure the nonprofit organization is a 501(c)(3) public charity or private foundation
Keep a record of the contribution (usually the tax receipt from the charity)
Depending on the donation amount/type, you may need to obtain a qualified appraisal to substantiate the claimed value of the deduction
Subtract the value of any benefits you received for your charitable contribution before you deduct it
I’m happy to advise on your situation and help you maximize your charitable giving for this tax year. I can be reached by phone at 515-371-6077 and by email at gordon@gordonfischerlawfirm.com.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/05/ben-white-170542.jpg40166016Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-22 23:44:192020-05-18 11:28:3825 Days of Giving: Quick Rule-of-Thumb on Charitable Deduction Limits
Thanks for 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 to be answered regarding charitable giving? Contact me.
I’ve covered the term quid pro quo in a previous legal word-of-the-day blog post and much of that applies to understanding quid pro quo donations. In short, quid pro quo (now you know Latin!) translates to “something for something” and means an exchange of goods or services, where one transfer is contingent upon the other. In the case of nonprofit organizations, sometimes a good or service is offered in exchange for a donation. When the donor makes a charitable donation more than $75 and the nonprofit offers a good or service in exchange for said donation, the tax-exempt charity must provide a written statement to the donor disclosing the following:
Statement of the good(s) or service(s) received in exchange for the donation.
A fair market value (FMV) of the good(s) or service(s) received.
Information for the donor that only a portion of the total contribution (the portion that exceeds the FMV) is eligible for a federal income tax charitable contribution deduction.
What Nonprofits Need to Know
As a nonprofit organization offering a quid pro quo donation situation, there’s a penalty for not making the required disclosure of contributions greater than $75. The penalty is $10 per contribution up to $5,000 per fundraising mailer or event. If your nonprofit fails to disclose, but can prove the failure was due to a reasonable cause, the penalty may be avoided.
Offering a good or service as an incentive for a donation can be a great way to spark donor interest, but you’ll definitely want to determine the FMV and have a reasonable method, applied in good faith, for doing so. This can be easier said than done for goods and services that are not generally or commercially available. If that’s the case it’s recommended to estimate the FMV off of similar/comparable products and services that are available. Let’s consider a couple examples: Example 1. For a contribution of $20,000 a history museum allows a donor to hold a private event in a ballroom of the museum. The museum doesn’t typically rent out this room, so how can a FMV be determined if there’s no standard rate? Looking at other similarly sized and quality ballrooms in the surrounding, general area cost $3,000 a night to rent. So, even though the museum’s ballroom has unique artifacts, a good faith estimate of the FMV of the museum’s ballroom is $3,000. The donor would then have a charitable contribution deduction total of $17,000.
Example 2.Your charity offers a one-hour golf lesson with a golf pro at the local country club to anyone who donates $500 or more. Usually the golf pro can be hired for a one-hour lesson for $100. An estimate made in good faith of the lessons’s FMV is $100.
Example 3.What if the service offered is unique, but is typically free? A state park foundation fundraiser advertises that a donation of $200 or more entitles you a spot on one of four different guided nature hikes with a volunteer park ranger. Typically the foundation doesn’t offer guided hikes to the general public, but hiking in the state parks is otherwise free. So, the FMV made in good faith for the hike is $0 and the charitable contribution eligible for deductions would be the full amount.
As a donor, if you’re making a contribution to an organization and receive something in exchange, know that it’s almost like you’re paying for the good/service you receive, but then can deduct the rest of the contribution.
Let’s say you make a charitable contribution of $100 to a 501(c)(3) organization that helps mistreated farm animals. To celebrate their anniversary, the organization is offering donors that gift $80 or more a large coffee table book filled with stories, poems, and photographs of the animals the organization has helped over the years. The book’s fair market value is $30. This FMV is based on the price if you were to buy it outright from the organization’s online shop. In this situation you as a donor would need to receive a written disclosure detailing your contribution amount ($100), FMV of the good (the book) received ($30), and the portion that is considered a tax-deductible charitable contribution amount ($70).
Even though the tax-deductible charitable contribution amount is $70 (less than the $75 threshold), the total donation was $100, so the charity is still required to provide a written disclosure.
Whether you’re a donor or a nonprofit leader, I’m here to help promote and maximize charitable giving in Iowa. Questions about written disclosure compliance or FMV calculation? Don’t hesitate to contact me.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/12/brigitte-tohm-162814.jpg34335150Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-21 15:59:162020-05-18 11:28:3925 Days of Giving: The Deal with Quid Pro Quo Donations
25 Days of Giving: Substantiation Requirements of Charitable Gifts made by Payroll Deduction
Charitable Giving, Taxes & FinanceThanks for reading the 25 Days of Giving series! Share with friends, family, & colleagues to inspire others to also make meaningful year end gifts this season…and plan ahead for 2020 charitable goals.
Under the current tax code, you may have changed the ways in which you give or the tax-beneficial strategies you employ with your charitable giving as compared to previous tax laws. What hasn’t changed, is that you may choose to deduct from your federal income tax any charitable contributions of money or property made to qualified organizations if you itemize your deductions. But, there are record keeping requirements you’ll want to stay on top of, so you’re not scrambling during tax time!
Payroll deduction substantiation
Making a charitable deduction directly from your paycheck is a great and steadfast way to be sure to meet your charitable giving goals. For charitable contributions made via payroll deductions, the donor needs two documents to substantiate the gift:
Donors who give to a local United Way or other organizations that funnel contributions to other charities need to only obtain the pledge card or other document from the United Way and not from the affiliated charities which ultimately receive the money.
Payroll deductions of $250 or more
Tax law requires that for any contribution of $250 or more, the taxpayer must substantiate the contribution by a contemporaneous written acknowledgement of the contribution by the charity. For payroll deductions, the contribution amount withheld from each payment of wages to a taxpayer is treated as a separate contribution for purposes of the $250 threshold.
So, for example, a taxpayer who gave $300 over the course of a year through payroll deductions, $30 per paycheck over ten paychecks, would not trigger the $250 substantiation requirement. The substantiation requirement would only kick in if $250 or more is withheld from each paycheck.
If any of this is confusing, know you don’t have to navigate these requirements just by yourself. Contact me at any time to discuss your situation and charitable giving goals. We’ll figure out the best course of action together!
25 Days of Giving: Quick Rule-of-Thumb on Charitable Deduction Limits
Charitable Giving, Taxes & FinanceIf you choose to itemize your taxes, charitable contributions can reduce your tax bill. Generally you would choose to itemize when the combined total of your anticipated deductions (like charitable gifts) add up to more than the standard deduction. For 2019 taxes the standard deductions are:
If you do choose to itemize, limits on federal income tax charitable deductions are quite high, but they do exist. Keep this in mind as you make any year-end donations. The specific limitations are complicated, and there are numerous exceptions. The limits are based on your AGI (adjusted gross income). AGI is an individual’s total gross income minus specific deductions.
A quick rule-of-thumb for different types of donated assets to public charities:
Note that these rates are for public tax-exempt organization and private operating foundations. Contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are limited to 30% adjusted gross income. (Check out these IRS status codes and deductible limits if you’re unsure of an organization’s limit.)
As I mentioned, most people won’t exceed these limits indicated above, but it can happen. For instance, if Jane Donor is a retiree living off of savings and donates more than her investments yield over the year, her limit could be exceeded. The good news is that in this case the IRS allows you carry over excess contributions for up to five following tax years.
Don’t forget to take these steps if you plan to itemize your charitable deductions:
I’m happy to advise on your situation and help you maximize your charitable giving for this tax year. I can be reached by phone at 515-371-6077 and by email at gordon@gordonfischerlawfirm.com.
25 Days of Giving: The Deal with Quid Pro Quo Donations
Charitable Giving, NonprofitsThanks for 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 to be answered regarding charitable giving? Contact me.
I’ve covered the term quid pro quo in a previous legal word-of-the-day blog post and much of that applies to understanding quid pro quo donations. In short, quid pro quo (now you know Latin!) translates to “something for something” and means an exchange of goods or services, where one transfer is contingent upon the other. In the case of nonprofit organizations, sometimes a good or service is offered in exchange for a donation. When the donor makes a charitable donation more than $75 and the nonprofit offers a good or service in exchange for said donation, the tax-exempt charity must provide a written statement to the donor disclosing the following:
What Nonprofits Need to Know
As a nonprofit organization offering a quid pro quo donation situation, there’s a penalty for not making the required disclosure of contributions greater than $75. The penalty is $10 per contribution up to $5,000 per fundraising mailer or event. If your nonprofit fails to disclose, but can prove the failure was due to a reasonable cause, the penalty may be avoided.
Offering a good or service as an incentive for a donation can be a great way to spark donor interest, but you’ll definitely want to determine the FMV and have a reasonable method, applied in good faith, for doing so. This can be easier said than done for goods and services that are not generally or commercially available. If that’s the case it’s recommended to estimate the FMV off of similar/comparable products and services that are available. Let’s consider a couple examples:
Example 1. For a contribution of $20,000 a history museum allows a donor to hold a private event in a ballroom of the museum. The museum doesn’t typically rent out this room, so how can a FMV be determined if there’s no standard rate? Looking at other similarly sized and quality ballrooms in the surrounding, general area cost $3,000 a night to rent. So, even though the museum’s ballroom has unique artifacts, a good faith estimate of the FMV of the museum’s ballroom is $3,000. The donor would then have a charitable contribution deduction total of $17,000.
Example 2. Your charity offers a one-hour golf lesson with a golf pro at the local country club to anyone who donates $500 or more. Usually the golf pro can be hired for a one-hour lesson for $100. An estimate made in good faith of the lessons’s FMV is $100.
Example 3. What if the service offered is unique, but is typically free? A state park foundation fundraiser advertises that a donation of $200 or more entitles you a spot on one of four different guided nature hikes with a volunteer park ranger. Typically the foundation doesn’t offer guided hikes to the general public, but hiking in the state parks is otherwise free. So, the FMV made in good faith for the hike is $0 and the charitable contribution eligible for deductions would be the full amount.
The only time you wouldn’t need to disclose the quid pro quo donation is when the good(s) or service(s) are of insubstantial value. The IRS also says disclosure is not required when the donor makes a payment of $75 or less (per year) and the exchange is only membership benefits that equate to, “Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services.” The contribution can also stay undisclosed if the good/service is, “Admission to events that are open only to members and the cost per person of which is within the limits for low-cost.”
Basics of What Donors Need to Know
As a donor, if you’re making a contribution to an organization and receive something in exchange, know that it’s almost like you’re paying for the good/service you receive, but then can deduct the rest of the contribution.
Let’s say you make a charitable contribution of $100 to a 501(c)(3) organization that helps mistreated farm animals. To celebrate their anniversary, the organization is offering donors that gift $80 or more a large coffee table book filled with stories, poems, and photographs of the animals the organization has helped over the years. The book’s fair market value is $30. This FMV is based on the price if you were to buy it outright from the organization’s online shop. In this situation you as a donor would need to receive a written disclosure detailing your contribution amount ($100), FMV of the good (the book) received ($30), and the portion that is considered a tax-deductible charitable contribution amount ($70).
Even though the tax-deductible charitable contribution amount is $70 (less than the $75 threshold), the total donation was $100, so the charity is still required to provide a written disclosure.
Whether you’re a donor or a nonprofit leader, I’m here to help promote and maximize charitable giving in Iowa. Questions about written disclosure compliance or FMV calculation? Don’t hesitate to contact me.