Marcum LLP
2017 Year-End Tax Guide

 

Maximizing Charitable Contributions

Maximizing Charitable Contributions
 

There are a myriad of rules regarding deductibility of cash contributions to qualified organizations, along with percentage limitations on the amount of permitted deductions.

There is seemingly no end to the solicitations we receive from qualified charitable organizations seeking our support. Appeals come routinely by regular mail, e-mail, television commercials, and word-of-mouth from religious, educational, social, cultural, and political organizations. Our collective support to these institutions serves a growing need for assistance to those in need throughout our country, and throughout the world. While our generosity is needed and makes us feel good, it is important to make certain we maximize our charitable tax deductions, which also makes us feel good.

There is a myriad of rules regarding deductibility of cash contributions to qualified organizations, along with percentage limitations on the amount of permitted deductions in connection personal adjusted gross income, and additional limitations depending upon the type of organization.

Two particularly important questions regarding charitable deductions are:

  • What deduction(s) are volunteers who provide personal services to a charitable organization entitle to?
  • What type of substantiation to support a charitable donation is required to be secured, retained, and filed with your tax return?

DEDUCTIONS FOR VOLUNTEERS
The value of your time is never deductible as a charitable contribution. Even such a valuable donation as a pint of blood, while noble, does not entitle you to a tax deduction.

But, taxpayers who volunteer with charitable organizations are permitted to deduct out-of-pocket costs incurred while performing services to the charity, limited to the generally applicable rules and regulations for charitable contributions. Volunteers who incur the following types of expenses will be entitled to a tax deduction:

  • Away-from-home travel expenses, including roundtrip travel, taxi, and transportation between airports, hotels, and events, provided, of course, that the trip is primarily undertaken for charity business and not personal pleasure.
  • Entertainment costs for others on behalf of the charity. (The cost of your own entertainment or meal is not deductible.)
  • Unreimbursed expenses directly attributable to use of a personal vehicle while performing services for a charitable organization may be deducted. Alternatively, a flat $0.14 per mile deduction for charitable use of a personal vehicle is available.
  • Miscellaneous expenses such as printing, telephone use, mailings, or any other similar expenditures on behalf of a charitable organization.

Charitable deductions for the above expenses must be substantiated by a written acknowledgement from the charity if the expenditures exceed $250. Acknowledgement should be secured indicating the amount expended, category of expenses, and confirming the volunteer received nothing of value in return for the contribution or time incurred.

Funds spent on behalf of a charity must be supported by written documentation from the charity about the nature of volunteers' efforts and the need for the expenses. Significant costs should be submitted to the charity with receipts. The charity should provide (or the volunteer should request) confirmation, even if there is no reimbursement. As always, maintain detailed records of all expenses.

If volunteer efforts are ongoing and expenses are significant, consider arranging with the charity for the organization to directly pay all of the expenses incurred during voluntary service and reimburse the charity with a tax deductible contribution to cover these costs. This may simplify the documentation requirements.

Great personal satisfaction can come from doing good deeds, but when you do good deeds and also secure a tax deduction, it can provide additional motivation and also amplify your allocation of personal monies to charitable causes.

SUBSTANTIATION FOR CHARITABLE DONATIONS
Recent cases have denied taxpayers deductions for charitable donations, for failure to secure and file required documentation with their tax returns.

The greater the dollar value of your donations, the more important it is to retain the appropriate documentation and complete the required IRS forms. Following is a brief guide to the pertinent rules and regulations.

CASH DONATIONS
Cash donations are relatively simple to administer; all that is required is a bank record documenting the donation, or a written receipt from the charity, indicating the charity's name, date of donation, and the amount of the contribution. Cash donations in excess of $250, per gift, will require that the donor retains a copy of the canceled check, and the charity will need to provide a donor acknowledgement letter no later than the due date of the tax return. The written acknowledgement must state whether any goods or services were received in consideration with the donation.

CONTRIBUTIONS OF PROPERTY
A contribution of tangible property is an easy way to secure a charitable contribution deduction, so long as all rules and regulations are followed. The general rules are as follows:

  • Property donations valued at |less than $250 should be substantiated by a written receipt from the charity, showing the organization's name, the date, and place of the contribution, along with a detailed description of the property. (Donors should also retain records that indicate the property's cost basis and fair market value on the date of contribution.)
  • Contributions in excess of $250 require more documentation. In this case, donors must receive a written acknowledgement from the charity following rules similar to the above for cash donations. If the charitable contribution exceeds $500, Form 8283 must be completed and included with your tax return.
  • For property contributions of $5,000 or more, a qualified appraisal must be secured and Schedule B of Form 8283 (the Appraisal Summary) must be signed by the appraiser and the donee organization. The signed appraisal is then attached to the filed tax return. Extensive rules apply to the completion of Form 8283 and the contents required to be included in the qualified appraisal. The appraisal must be done by a qualified appraiser in accordance with generally accepted appraisal standards. The appraiser must have verifiable education and experience in valuing the specific type of property which has been donated.

If is the donation consists of artwork or other high value property, strict adherence to IRS rules and regulations is imperative.

If the property donation consists of publicly traded securities, an appraisal is not required if there are readily available market quotations for the securities.

AN APP FOR THIS, TOO?

Yes, of course. For all the Millennials out there (and others, too), you can now track, post, download, volunteer, and reap the rewards of your charitable endeavors all with the swipe of your finger! Here's how:

IT'S DEDUCTIBLE
An actual donation tracker that maintains your charitable giving in order to get back the maximum deductions allowable. The app tracks cash and non-cash gifts as well as mileage, and even values donated items.

Shoeboxed
A receipt and mileage tracker utilizing photos of your receipts. The app extracts the vendor, gift amount, payment method, and date, and categorizes the information into the most common tax categories. Users can instantly create expense reports and send them right from their phone to their accountant.

Idonatedit:
Tracks non-cash donations along with photos, allowing donors to document and maintain a permanent record of the donated items. The app provides the ability to create an itemization of the detail which can be emailed directly to an accountant.

Mileiq
Is used to track mileage for charitable purposes (business or medical, too!) and download the information into Excel-compatible reports for expense purposes. This app helps the user track for personal vs. business- related expenses as well as reimbursable costs.

Everlance
Tracks mileage and expenses. Mileage is automatically recorded as the volunteer actually drives. Receipts can be uploaded and categorized in files with an easy swipe. Free or premium versions are available.

Golden volunteer opportunities
Search and explore new volunteer opportunities.

Deed app
For those that want to explore high- impact volunteer opportunities by browsing detailed information about not-for-profit organizations and what volunteering tasks are available, so users can choose opportunities of interest. Through the social media exchange, friends can be invited join you as well.

Remember the tax benefits available to volunteers and donors of cash, securities, and personal property. In order to maximize your opportunity for charitable tax deductions, it is important to consult with your Marcum tax advisor to make certain proper documentation requirements are met.



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