Thank you for reading the 25 Days of Giving series! In the spirit of the holiday season, I’m covering different aspects of charitable giving…perfect to get you thinking about your end-of-year giving.
There are many, many reasons Iowa is a great place to live and work. One reason is the Endow Iowa Tax Credit Program—a smart way to stretch your charitable dollars. Iowa community foundations provide exclusive access to the Endow Iowa Tax Credit program. Giving through the Endow Iowa program allows Iowa taxpayers to receive a 25% Iowa tax credit, in addition to the federal charitable income tax deduction, for qualifying charitable gifts.
The Endow Iowa Tax Credit Program provides unique opportunities to meet philanthropic goals while receiving maximum tax benefits. Highlights of this program include:
A variety of gifts qualify for Endow Iowa Tax Credits including cash, real estate, grain, appreciated securities, and outright gifts of retirement assets. In fact, appreciated assets, like stocks or real estate, can provide even better value because the donor may avoid capital gains taxes.
To be eligible, Endowed Tax Iowa Credit gifts must be placed in a permanent endowment fund of a qualifying organization. The endowment funds are intended to exist in perpetuity (continual), and the spend rate from the fund may not exceed 5% annually.
Tax credits of 25% of the gifted amount are limited to $300,000 in tax credits per individual for a gift of $1.2 million, or $600,000 in tax credits per couple for a gift of $2.4 million, assuming both are Iowa taxpayers.
Eligible gifts will qualify for credits on a first-come/first-serve basis until the yearly appropriated limit is reached. If the current available Endow Iowa Tax Credits have been awarded, qualified donors will be eligible for the next year’s Endow Iowa Tax Credits. Donors should be encouraged to act as early in the year as possible to ensure receipt of credits as soon as possible.
All qualified donors can carry forward the tax credit for up to five years after the year the donation was made.
It should also be noted that the Endow Iowa Tax Credits are capped. The Iowa Legislature sets aside a pool of money for Endow Iowa, and it’s available on a first-come, first-serve basis. Submitting an application at the beginning of the tax year is advised, as tax credits often run out toward year’s end. In fact, this year approximately $6 million in tax credits were awarded and there are no more available credits to be granted. However, you can submit your application to be placed on the waitlist for 2020 tax credits.
In exchange for 25% Iowa tax credit and the opportunity to have an even greater impact on their philanthropic interests in the state of Iowa, now and into the future, the Endow Iowa Tax Credit Program should be seriously considered by all. The impact is immense: in 2018, donors received tax credits for more than 3,434 separate donations to 76 different community foundations and affiliate organizations through Endow Iowa. And, since 2003, more than $263 million has been invested through the program to improve residents’ lives.
Any questions or thoughts on how the Endow Iowa Tax Credit Program could mean big benefits for your finances and your state? Don’t hesitate to contact me.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2015/06/jess-watters-470870.jpg33504467Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-20 10:18:172020-05-18 11:28:3925 Days of Giving: Basics of the Endow Iowa Tax Credit Program
Thanks for reading the 25 Days of Giving series where w a’re “unwrapping” important info on various aspects of charitable giving each day through Christmas. Share with friends, family, & colleagues to inspire others to also make meaningful gifts this season.
If you’re making a non-cash charitable donation of over $5,000, first off, high five! That’s going to go a long way toward helping your favorite charity or advancing a cause you feel passionate about. Because you’re a smart donor, you’re also probably planning to claim the federal income tax charitable deduction as a way of reducing your taxes. In order to do this, gifts of that size come with specific requirements from the IRS that you’ll want to be sure to meet.
Requirements for “qualified appraisal” and “qualified appraiser”
Non-cash gifts of more than $5,000 in value, with exceptions, require a qualified appraisal completed by a qualified appraiser. The terms “qualified appraisal” and “qualified appraiser” are very specific and have detailed definitions according to the IRS.
Qualified appraisal
A qualified appraisal is a document which is:
made, signed, and dated by a qualified appraiser in accordance with generally accepted appraisal standards;
timely;
does not involve prohibited appraisal fees; and
includes certain and specific information.
Let’s further examine each of these four requirements.
“Qualified appraiser:” Appraiser education and experience requirements
An appraiser is treated as having met the minimum education and experience requirements if she is licensed or certified for the type of property being appraised in the state in which the property is located. For a gift of real estate in Iowa, this means certification by the Iowa Professional Licensing Bureau, Real Estate Appraisers.
Further requirements for a qualified appraiser include that s/he:
regularly performs appraisals for compensation;
demonstrates verifiable education and experience in valuing the type of property subject to the appraisal;
understands she may be subject to penalties for aiding and abetting the understatement of tax; and
not have been prohibited from practicing before the IRS at any time during three years preceding the appraisal.
Also, a qualified appraiser must be sufficiently independent. This means a qualified appraiser cannot be any of the following:
the donor;
the donee;
the person from whom the donor acquired the property [with limited exceptions];
any person employed by, or related to, any of the above; and/or
an appraiser who is otherwise qualified, but who has some incentive to overstate the value of the property.
Timing of appraisal
The appraisal must be made not earlier than 60 days prior to the gift and not later than the date the return is due (with extensions).
Prohibited appraisal fees
The appraiser’s fee for a qualified appraisal cannot be based on a percentage of the value of the property, nor can the fee be based on the amount allowed as a charitable deduction.
Specific information is required in appraisal
Specific information must be included in an appraisal, including:
a description of the property;
the physical condition of any tangible property;
the date (or expected date) of the gift;
any restrictions relating to the charity’s use or disposition of the property;
the name, address, and taxpayer identification number of the qualified appraiser;
the appraiser’s qualifications, including background, experience, education, certification, and any membership in professional appraisal associations;
a statement that the appraisal was prepared for income tax purposes;
the date (or dates) on which the property was valued;
the appraised fair market value on the date (or expected date) of contribution;
the method of valuation used to determine fair market value;
the specific basis for the valuation, such as any specific comparable sales transaction; and
an admission if the appraiser is acting as a partner in a partnership, an employee of any person, or an independent contractor engaged by a person, other than the donor, with such a person’s name, address, and taxpayer identification number.
Appraiser’s dated signature and declaration
Again, a qualified appraisal must be signed and dated by the appraiser. Also, there must be a written declaration from the appraiser she is aware of the penalties for substantial or gross valuation.
Reasonable cause
Tax courts have held that a taxpayer’s reliance on the advice of a professional, such as an attorney or CPA constitutes reasonable cause and good faith if the taxpayer can prove by a preponderance of the evidence that: (1) the taxpayer reasonably believed the professional was a competent tax adviser with sufficient expertise to justify reliance; (2) the taxpayer provided necessary and accurate information to the advising professional; and (3) the taxpayer actually relied in good faith on the professional’s advice.
If this sounds like a lot, 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/2015/11/bob-ricca-122708.jpg28324256Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-19 13:51:222020-05-18 11:28:3925 Days of Giving: IRS requirements for non-cash gifts greater than $5,000
Thank you for reading the 25 Days of Giving series! In the spirit of the holiday season, I’m covering different aspects of charitable giving…perfect to get you thinking about your end-of-year giving.
I came across an article in Forbes about two tax court cases where families claimed large charitable contributions on their federal income tax and, given that they were fraudulent claims, failed to have the substantiation to back it up. As the article stated, “the IRS is NOT messing around when it comes to holding taxpayers to the substantiation requirements for charitable contributions.” The substantiation is required in exchange for the federal income charitable deduction.
First and foremost, the donations must be made to a qualified charitable organization.You must then be able to substantiate your contribution to said qualified charitable organization. The record-keeping required by the IRS depends on the amount of your contribution. At their most basic, the IRS substantiation rules for the charitable deduction are as follows:
Gifts of less than $250 per donee — you need a canceled check or receipt
$250 or more per donee — you need a timely written acknowledgment from the donee
Total deductions for all property exceeds $500 — you need to file IRS Form 8283
Deductions exceeding $5,000 per item — you need a qualified appraisal completed by a qualified appraiser
Let’s focus for today on gifts of $250 or more per donee. Specifically, the income tax charitable deduction is not allowed for a separate contribution of $250 or more unless the donor has written substantiation from the donee of the contribution in the form of a contemporaneous written acknowledgment.
Note this $250 threshold is applied to each contribution separately. So, if a donor makes multiple contributions to the same charity totaling $250 or more in a single year, but each gift is less than $250, written acknowledgment is not required. [Unless the smaller gifts are related and made to avoid the substantiation requirements].
Written acknowledgment
The written acknowledgment must indicate:
the name and address of the donee;
the date of the contribution;
the amount of cash contributed;
a description of any property contributed;
whether the donee provided the donor any goods or services in exchange for the contribution; and, if so;
a description, and a good faith estimate, of the value of the goods or services provided or, if the only goods or services provided were intangible religious benefits, a statement to that effect.
Contemporaneous acknowledgment
The IRS definition of contemporaneous is that the acknowledgment must be obtained by the donor on or before the earlier of:
a. the date the donor files the original return for the year the donation was made; or
b. the return’s extended due date.
A donor cannot amend a return to include contributions for which an acknowledgment is obtained after the original return was filed.
Interestingly, the responsibility for obtaining this documentation lies with the donor. The donee (the charity) is not required to record or report this information to the IRS on behalf of the donor.
If this sounds like a lot, 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/spencer-imbrock-490831.jpg30944638Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2019-12-18 20:11:392020-05-18 11:28:4025 Days of Giving: Tax tip- Substantiation of Gifts of $250 or More per Donee
25 Days of Giving: Basics of the Endow Iowa Tax Credit Program
Charitable Giving, Nonprofits, Taxes & FinanceThank you for reading the 25 Days of Giving series! In the spirit of the holiday season, I’m covering different aspects of charitable giving…perfect to get you thinking about your end-of-year giving.
There are many, many reasons Iowa is a great place to live and work. One reason is the Endow Iowa Tax Credit Program—a smart way to stretch your charitable dollars. Iowa community foundations provide exclusive access to the Endow Iowa Tax Credit program. Giving through the Endow Iowa program allows Iowa taxpayers to receive a 25% Iowa tax credit, in addition to the federal charitable income tax deduction, for qualifying charitable gifts.
The Endow Iowa Tax Credit Program provides unique opportunities to meet philanthropic goals while receiving maximum tax benefits. Highlights of this program include:
It should also be noted that the Endow Iowa Tax Credits are capped. The Iowa Legislature sets aside a pool of money for Endow Iowa, and it’s available on a first-come, first-serve basis. Submitting an application at the beginning of the tax year is advised, as tax credits often run out toward year’s end. In fact, this year approximately $6 million in tax credits were awarded and there are no more available credits to be granted. However, you can submit your application to be placed on the waitlist for 2020 tax credits.
In exchange for 25% Iowa tax credit and the opportunity to have an even greater impact on their philanthropic interests in the state of Iowa, now and into the future, the Endow Iowa Tax Credit Program should be seriously considered by all. The impact is immense: in 2018, donors received tax credits for more than 3,434 separate donations to 76 different community foundations and affiliate organizations through Endow Iowa. And, since 2003, more than $263 million has been invested through the program to improve residents’ lives.
Any questions or thoughts on how the Endow Iowa Tax Credit Program could mean big benefits for your finances and your state? Don’t hesitate to contact me.
25 Days of Giving: IRS requirements for non-cash gifts greater than $5,000
Charitable Giving, Taxes & FinanceThanks for reading the 25 Days of Giving series where w a’re “unwrapping” important info on various aspects of charitable giving each day through Christmas. Share with friends, family, & colleagues to inspire others to also make meaningful gifts this season.
If you’re making a non-cash charitable donation of over $5,000, first off, high five! That’s going to go a long way toward helping your favorite charity or advancing a cause you feel passionate about. Because you’re a smart donor, you’re also probably planning to claim the federal income tax charitable deduction as a way of reducing your taxes. In order to do this, gifts of that size come with specific requirements from the IRS that you’ll want to be sure to meet.
Requirements for “qualified appraisal” and “qualified appraiser”
Non-cash gifts of more than $5,000 in value, with exceptions, require a qualified appraisal completed by a qualified appraiser. The terms “qualified appraisal” and “qualified appraiser” are very specific and have detailed definitions according to the IRS.
Qualified appraisal
A qualified appraisal is a document which is:
Let’s further examine each of these four requirements.
“Qualified appraiser:” Appraiser education and experience requirements
An appraiser is treated as having met the minimum education and experience requirements if she is licensed or certified for the type of property being appraised in the state in which the property is located. For a gift of real estate in Iowa, this means certification by the Iowa Professional Licensing Bureau, Real Estate Appraisers.
Further requirements for a qualified appraiser include that s/he:
Also, a qualified appraiser must be sufficiently independent. This means a qualified appraiser cannot be any of the following:
Timing of appraisal
The appraisal must be made not earlier than 60 days prior to the gift and not later than the date the return is due (with extensions).
Prohibited appraisal fees
The appraiser’s fee for a qualified appraisal cannot be based on a percentage of the value of the property, nor can the fee be based on the amount allowed as a charitable deduction.
Specific information is required in appraisal
Specific information must be included in an appraisal, including:
Appraiser’s dated signature and declaration
Again, a qualified appraisal must be signed and dated by the appraiser. Also, there must be a written declaration from the appraiser she is aware of the penalties for substantial or gross valuation.
Reasonable cause
Tax courts have held that a taxpayer’s reliance on the advice of a professional, such as an attorney or CPA constitutes reasonable cause and good faith if the taxpayer can prove by a preponderance of the evidence that: (1) the taxpayer reasonably believed the professional was a competent tax adviser with sufficient expertise to justify reliance; (2) the taxpayer provided necessary and accurate information to the advising professional; and (3) the taxpayer actually relied in good faith on the professional’s advice.
If this sounds like a lot, 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: Tax tip- Substantiation of Gifts of $250 or More per Donee
Charitable Giving, Taxes & FinanceThank you for reading the 25 Days of Giving series! In the spirit of the holiday season, I’m covering different aspects of charitable giving…perfect to get you thinking about your end-of-year giving.
I came across an article in Forbes about two tax court cases where families claimed large charitable contributions on their federal income tax and, given that they were fraudulent claims, failed to have the substantiation to back it up. As the article stated, “the IRS is NOT messing around when it comes to holding taxpayers to the substantiation requirements for charitable contributions.” The substantiation is required in exchange for the federal income charitable deduction.
Note there is, of course, a limit to the charitable deduction on your taxes. Mind this when considering maxing out your charitable deduction.
Substantiation requirements
First and foremost, the donations must be made to a qualified charitable organization. You must then be able to substantiate your contribution to said qualified charitable organization. The record-keeping required by the IRS depends on the amount of your contribution. At their most basic, the IRS substantiation rules for the charitable deduction are as follows:
Gifts of $250 or more per donee
Let’s focus for today on gifts of $250 or more per donee. Specifically, the income tax charitable deduction is not allowed for a separate contribution of $250 or more unless the donor has written substantiation from the donee of the contribution in the form of a contemporaneous written acknowledgment.
The $250 threshold
Note this $250 threshold is applied to each contribution separately. So, if a donor makes multiple contributions to the same charity totaling $250 or more in a single year, but each gift is less than $250, written acknowledgment is not required. [Unless the smaller gifts are related and made to avoid the substantiation requirements].
Written acknowledgment
The written acknowledgment must indicate:
Contemporaneous acknowledgment
The IRS definition of contemporaneous is that the acknowledgment must be obtained by the donor on or before the earlier of:
a. the date the donor files the original return for the year the donation was made; or
b. the return’s extended due date.
A donor cannot amend a return to include contributions for which an acknowledgment is obtained after the original return was filed.
Responsibility lies with the donor
Interestingly, the responsibility for obtaining this documentation lies with the donor. The donee (the charity) is not required to record or report this information to the IRS on behalf of the donor.
If this sounds like a lot, 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.