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Charitable Contributions Can Reduce Your Tax Bill for 2018

Charitable contributions can reduce your tax bill for 2018 provided you itemize your taxes.  Generally, you’d itemize when the combined total of your anticipated deductions—including charitable gifts— exceed the standard deduction applicable to you.

Only charitable contributions to qualified organizations are deductible.  Contributions to individuals are not deductible. To determine if an organization is a qualified organization for tax purposes, it’s best to consult your tax professional.   The IRS also offers some other resources including a Tax Exempt Organization Search tool and Publication 526.

There are several rules applying to certain kinds of donations.  For instance, if you receive a benefit from the contribution such as merchandise, goods or services, you can only deduct the donation to the extent it exceeds the fair market value of the benefit received.  In addition to cash contributions, you generally can deduct the fair market value of any other property you donate to qualified organizations.

For contributions of cash, check or other monetary gift, you must maintain a record of the contribution, either a bank record or a written communication from the qualified organization containing the name of the organization, the amount, and the date of the contribution.

There are a couple of charitable donation strategies for taxpayers with certain kinds of assets.   First, if you own appreciated investments, such as stocks, donating the shares is often sensible because you can deduct their full market value (subject to certain limits) without paying capital gains tax on the appreciation.  Second, for donors age 70½ or older with IRA accounts, you can direct contributions of up to $100,000 and that amount counts against your required yearly IRA distributions and is not included in taxable income.

We recommend you contact one of our tax professionals right away if you have any questions concerning charitable donations in general and how they apply to your specific tax situation.  

 

Sources:

 

Topic Number 506 – Charitable Contributions, IRS Release (2018)

 

“Is the Charitable Deduction Gone for 2018?” NOLO (2018).

 

“What the New Tax Law Means for Your Charitable Giving,” Forbes (Mar. 15, 2018).