Tips for Year-end Charitable Giving
December 8, 2011
By Ron Heller, Senior Vice President and Regional Executive, Union Bank, N.A.
Supporting charitable organizations that we are passionate about can provide us with a sense of purpose and meaning while contributing to the well being of our communities. It can also offer some financial benefits in the form of tax deductions. While a tax deduction may not be your main motivation for making a donation to your favorite charity, most financial advisors agree that you should take advantage of the tax break.
Here are some tips to guide you through end-of-year charitable giving:
Do You Qualify?
Only taxpayers who itemize their deductions can claim deductions for charitable contributions. A taxpayer will see a tax savings only if the total itemized deductions (such as mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. If you choose the standard deduction and file a short form (Form 1040A or 1040EZ), you may not write off charitable gifts.
Does the Charity Qualify?
Make sure your donations are made to an organization qualified to receive deductible contributions. Non-profit groups include eligible religious, educational and charitable groups. These groups are often referred to as 501(c)(3) organizations. Foreign charities and political organizations are generally not qualified for tax write-offs. Visit the IRS website (www.irs.gov) for a listing of qualified organizations.
Monetary donations include gifts of cash, check, credit card transaction, credit or debit card transaction, payroll deduction or automatic withdrawals from your bank account. If you accept something in return for your gift, such as a dinner at a function or a giveaway item, you must deduct the fair market value of that item from the amount you write off. Donations of $250 or more require a written acknowledgement from the charity containing the date and the amount of your donation.
Gifts of Clothing, Property and Other Items
Household items must be in good used condition to qualify for a deduction and can usually be deducted in the amount of the property’s fair market value --- the amount a buyer would be willing to pay if the property was sold on the open market. The Salvation Army publishes a guide providing the average prices of clothing, furniture and household items in its stores, to offer you some guidance on establishing the value of such items. The rules for more valuable gifts, such as jewelry, real estate and property can be complex, so consult your financial or tax advisor to determine the deductibility of these types of contributions.
Contributions made in the form of a check must be postmarked on or before December 31 in order to be itemized for 2011. Contributions made by credit card must be deducted in the year that the charge occurs, even if it the credit balance isn’t paid in that year. Pledges to make a contribution generally are not deductible until payment is actually made.
Remember the Receipt
Keep receipts and records of all your donations. Bank records, such as cancelled checks or bank and credit card statements work in lieu of receipts. For payroll deductions, retain a pay stub, a W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
The foregoing article is intended to provide general information about year-end charitable giving and is not considered financial advice from Union Bank. Please consult your financial or tax advisor.
Ron Heller is a senior vice president and regional executive for the Washington State region of Union Bank, N.A., a full-service commercial bank providing an array of financial services to individuals, small businesses, middle-market companies, and major corporations. As of September 30, 2011, the bank had 404 banking offices in