Questions for You and Your Professional Advisor.
Think about how you have served the community with time, treasure and talent and be proud of your contribution. Here are some things to consider during your end of year planning and an opportunity to obtain maximum tax benefits.
2016 or 2017?
Consider your expected marginal tax rate for this year and next to help decide when to time the gift. For example, if you have a pledge that must be satisfied by 2017, consider making the contribution now to speed up the deduction if you anticipate a drop in income and a lower tax rate in 2017.
Conversely, it may make sense to delay a planned 2016 contribution to January 2017 if you have relative certainty that your tax rate next year will be higher.
Cash or Securities?
When making charitable contributions, consider making the donation using appreciated capital gain property, such as marketable securities, rather than cash. If the property has been held for more than one year, you will obtain a deduc¬tion for the full market value of the security while any income tax on the gain will be avoided. One caution: deductions for gifts of appreciated property are limited to 30% of adjusted gross income (AGI) rather than the 50% limit for other charitable contributions.
Now or Later?
A contribution in the year you need a tax benefit may be made in to your personal philanthropic fund (Donor Advised Fund), for you to distribute at any time in the future to eligible organizations.
Taxpayers over the age of 70 ½ have an opportunity to use IRA distributions to make direct charitable contributions or contributions to an endowment fund. Contact Jewish Community Foundation for more information.
A final reminder is that all charitable contributions must be supported by evidence the gift was made and gifts over $250 must be supported by a receipt from the charity that received the gift. A thank you letter is not enough. The receipt must specifically state no goods or services were received in exchange for the gift. Absent this crucial language no income tax deduction is allowed. You also must have obtained the required documentation by the time you file your tax return for the year of the gift. Waiting until the IRS audit letter comes in the mail is too late.
No tax deduction is allowed for your time or the services you perform for charity, but you may still be entitled to some breaks. You can deduct the expense of using of your automobile while performing services for a charity. If you incur other out of pocket costs make sure you maintain detailed records, if the total exceeds $250 you’ll need to submit a statement of expenses and receive an acknowledgment of the total in writing from the charity.
Your generosity in gifting time and money to worthwhile causes can have a significant impact on your tax liability. While tax considerations should never drive your charitable giving, it certainly doesn’t hurt to structure your gifting to maxi¬mize the tax benefits.
The Jewish Community Foundation offers donor support and services with the utmost confidentiality. For questions or more information, call (858) 279-2740 or visit www.jcfsandiego.org.