by Kristin P. Sinclair – A Accu Tax – January 14, 2020 – Rock Hill, SC Charleston SC
We have heard in the news that the Standard Deduction is increasing and fewer people will be itemizing on the their tax returns over the next 7 years. The higher deduction is indeed expected to be taken by many. However for people who have a Mortgage on their home paying interest, they might want to look at itemizing and decide if it is to their advantage. Have deductible gifts to charity add this to the mix. And then also, taxes paid for home, vehicles, and state taxes on their earned income. Estimated state taxes on investments and retirement income. Collectively for all state taxes the $10,000.00 is the new norm at least for the next 7 years. Any taxes above that will not be deductible federally on the itemized portion of a tax return. Medical bills that exceed thresholds to also make a difference on the income tax return. Let us hope many can avoid high medical bills. If you pay premiums for your health insurance with post tax dollars however, that threshold could be more readily reached. Those things can potential add up you will not know for certain with out looking at the numbers.
But back to Charitable giving. Qualified charities need to be the ones you make your donations to if you want a tax deduction. Gifts to individuals, political organizations or candidates do not fall into that category as a general rule. The IRS actually has guidance on charitable giving. Your tax preparer is going to able to offer you guidance as well.
IRS.gov has an abundance of reference material available to look up at your leisure. Many charitable organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with section 170. Most eligible organizations are listed in Tax Exempt Organization Search.
A charitable organization must provide a written disclosure statement to donors of a quid pro quo contribution in excess of $75. A quid pro quo contribution is a payment made to a charity by a donor partly as a contribution and partly for goods or services provided to the donor by the charity. For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution portion of the payment is $60. Even though the part of the payment available for deduction does not exceed $75, a disclosure statement must be filed because the donor’s payment (quid pro quo contribution) exceeds $75.
The required written disclosure statement must:
Under a new recordkeeping rule effective for all cash, check, electronic funds transfers, credit card charges, or other monetary contributions of any amount made in taxable years beginning after August 17, 2006, the donor must obtain and keep a bank record or a written communication from the donee as a record of the contribution. Written records prepared by the donor (such as check registers or personal notations) are no longer sufficient to support charitable contributions. Bank records for this recordkeeping requirement include bank or credit union statements, canceled checks, or credit card statements. They must show the date paid or posted, the name of the charity, and the amount of the payment. Taxpayers who claim charitable contributions made by payroll deduction can satisfy the recordkeeping requirement if the donor has (1) a pay stub, W-2, or other document furnished by the employer that states the amount withheld for payment to charity, and (2) a pledge card other document prepared by or at the direction of the charity that shows the name of a donee. An organization described in section 170(c), or a Principal Combined Fund Organization for purposes of the Combined Federal Campaign, will be treated as a donee organization for purposes of the new recordkeeping provision.
When you donate to your choice of a charity that does the work that you value, you need have written documentation that you have given to the charity. This charity should provide you their assigned EIN and name and address on the documentation they send you to substantiate your giving record. They have a reference number you need to have that detail on their document provided. Along with your deductible donations, they provide the document to you and keep the document for when it is time to reference all of your charitable giving.
Many churches provide the members of the church community an envelope for the members of the congregation. They request that the members of the church community to please use the envelope to help the church, help the members; to accurately record tithes and offerings. Have that accurate written record. Each member or member family has a number assigned to their set of envelopes.. Do yourself and your community a favor, use those envelopes. Help the church bookkeeper to help the member track their giving. You the church member can also request to have the bookkeeper track your store receipts for food items you purchase to provide for the work of the church community. Request to have this additional detail to be included in your written recorded giving record. Helping you at the years end to have required documentation. Does your church have a social gathering and ask that members supply the coffee and the juice and the fruits etc. When you make the purchase, provide the church secretary a copy of that receipt with a note what the food purchase was for, and your member name and number, and ask that this record be added as well to be included in year end statement. Make it simple for yourself at tax time. Angel Tree at Christmas , Easter Lilly for the Easter Holiday, etc, etc, receipt, record, relax later.
When you give to national charities, to local charities, you will notice that they also provide paperwork that helps you substantiate your giving record during the annual period. When you give to your utility that has a charity arm function to help those in need of what that utility provides, they also help you track that in the statements that they send to you. They provide you a record in writing of your giving during the annual period.
If a charity asks you to give every month writing you again with a request, just because you gave last month; you can take charge, you decide how often you will send in a gift. Maybe two times a year works best for you, maybe every month. What every the schedule you need to feel that you are in control of your giving. You are the giver, you have control of what you want to give.
Payroll deduction for charity, your pay stub should reflect that giving you are making. And should reflect if the gift is post tax or otherwise. Only post tax gifts are deductible. That makes sense, no double dipping allowed.
When you watch your favorite Public Television station, during a fund raising month, you will tend to see a lot of programming that offers you the opportunity to buy a copy of the program and additional material as well. When you choose to make that purchase to help your PBS programming mission, you are getting something in return for your gift of giving. The gift to the charity is the amount less the amount of the value of the item you have purchased. When you simply give to the charity without getting a thank you gift, you out right gift is deductible, they will send you a receipt to reflect your transaction on behalf of the charity.
When your near and dear to your heart local charity has a wonderful fund raising opportunity to join other like minded people in your area for a evening including a meal and entertainment. Your ticket price to be part of this opportunity to celebrate with others, includes the amount for your gift, your meal, your entertainment, the cost of space rented to hold the event. So they will provide usually in small print some where on the ticket written record what the charitable value of your gift is for the evening. This amount is less than what you paid for this event itself. This too makes sense, that meal was okay, maybe even good. The joy and laughter you enjoyed priceless, spending time with people who have a passion for the same charitable cause you put your time talent and treasure into. We all like to be able to spend time with folks who are dedicated to a cause near and dear to our heart and our wallet.
You have decided that you have a lot of stuff in the closet, the garage, the attic etc. That you no longer need to store, in your homes precious space. But realize others could benefit from these things you have been storing in safe keeping. These items are in better than good condition. They have a value to others and have a useful opportunity for someone else. You need to write down what these items are Their purchase price, their charitable value and the date of the donation. Hey, go ahead take a picture of the offering as well if you like. When you are asked, do you want a receipt, YES you do. Attach the receipt to your piece of paper. Put your name on the receipt with detail or see attached document. Put this in your tax file. What you need to document as to support your values for these non cash contributions, has just saved you time and frustration later, you plan ahead.
Consider what you paid for these items, and what these item have as a value to others. When your charity sells that item that is the value of the item to the charity. Ask your tax preparer for a guide to offer you assistance to assign values. These guides are updated regularly. They provide a range price for item type. You visit a charity that sells donated items what do they sell items similar to your gift for? It likely is going to with in the range of the published document your tax preparer provided you with. You need to use value reflective of what your charity can sell the item. You do this several times during an annual period you will find that those numbers really add up quickly.
When it comes time to actually do your tax return you will be proud of yourself. Your tax preparer will be proud of you as well.
Since the standard deduction has changed some people will find that they will instead take the standard deduction. Some people will find that they will be better off to still itemize. But without a doubt, when you itemize you need to have a written record to support your position. Your charity needs to be a qualified charity, for federal gift giving purposes. It is information gathering that you need to do if you feel that itemizing tax deductions is important to your situation.
Kristin P Sinclair – A Accu Tax – January 14, 2020
Rock Hill, SC Charleston, SC