Advisors – charitable strategies to help your clients

YEAR-END CHECKLIST FOR CHARITABLE GIVING

With 2018 only days away, your clients are likely contemplating year-end charitable gifts in order to maximize their tax benefits, particularly in light of the proposed tax reform legislation. Not only do clients tend to be in the giving spirit around this time of year, but they also can significantly reduce their tax burden by making charitable contributions. Unlike gifts from Santa, however, tax benefits do not come without strings. Here is a checklist of issues to keep in mind for year-end charitable giving:

• Be mindful of the potential impact of proposed tax reform legislation. While there has not been any traction on repealing the charitable income tax deduction, the proposal to increase the standard deduction to $24,000 for a joint return and eliminate many other tax deductions may reduce the incentive for some clients to itemize, thus potentially reducing charitable giving in 2018 and beyond. For clients who may not itemize if the proposed bill becomes law, they may be interested in making more substantial charitable gifts this year.
• Ensure good record-keeping and substantiation. While charities are required to provide acknowledgments for every gift over $250 received, the ultimate burden is on the taxpayer to ensure that the acknowledgment has been received and contains the information required by the IRS.
  • A contemporaneous written acknowledgment from the charitable organization should be sufficient.
  • Property:
    • Over $500: additional substantiation with the contemporaneous written acknowledgment is required.
    • $500-$5,000: records must also provide the date and manner in which the property was acquired or created and its adjusted basis.
    • Over $5,000: a qualified appraisal in compliance with Treasury Reg. 1.170A-13(c)(3) is required.
  • Quid pro quo. When a payment to a charity consists partly of a donation and partly in return for something of value, the amount of the taxpayer’s charitable donation is the amount of the payment less the amount attributable to the value received. Such contributions over $75 must be acknowledged in writing and include a good faith estimate of the value of the goods or services provided to the donor.
  • For more on these requirements, see IRS Publication 552 and Treasury Reg. 1.170A-13.
• Be aware of timing. In order for a donation to be deductible from 2017 taxes, the gift must be made on or before December 31^st. For checks, the gift is considered “made” as of the date of the postmark; it need not be cashed. Credit card transactions are considered “made” as of the date the transaction is complete, even if the credit card bill is not paid until January.
• Think outside the box. Consider donations of non-cash assets for year-end gifts like closely-held stock and appreciated securities, and avoid costly capital gains tax.  For more on gifts of non-cash assets, see our article on Gifts of Appreciated Business Interests.
• Vet your clients’ charities.
  • Qualified entities. Charitable contributions must be made to qualified entities in order to be deductible. To determine whether a client’s charitable organization is considered an exempt organization, for which the client may take the charitable deduction, the IRS provides the Exempt Organizations Select Check Tool. Please note that religious organizations and government agencies are eligible for tax-deductible donations, even if not in the IRS database.
  • Effective charities. Evaluating the effectiveness of charities that have received funds from your clients in the past, or those in which your clients are prospectively interested, is a huge value-add opportunity and where CICF can come in. Our staff provide expertise on effective charities to CICF fund holders. They have the inside track on not-for-profits that are making real strides to better our community in the areas in which your clients are passionate.

When working with your clients to plan their year-end charitable gifts, keep these things, and CICF, in mind. To learn more about how CICF can help your clients with their year-end charitable giving, contact Mary Stanley, director of gift planning and legal affairs, at marys@cicf.org or 317.634.2423 x 319 or Sarah Weaver, senior gift planning advisor, at sarahw@cicf.org or 317.634.2423 x 510.