Quick reminders about timing and receipts for your 2017 charitable donations
- Tax Planning
If you’ll be claiming a 2017 federal income tax deduction for the gifts you make to charity this season, remember to:
- Make sure the donation is received by the charity in time to qualify for this year’s tax deduction.
- Get the proper IRS documentation for each donation.
Meeting the December ‘delivery’ date
The date when your donation is officially “delivered” is critical because that will determine the tax year when the gift can be deducted as well as the value of the gift.
- If you are making contributions online with credit cards, they are usually acknowledged by the charity right away. Still, it’s best to make sure you get a confirmation from each charity that your gift was received no later than December 31 so the gift donation is deductible for the 2017 tax year. Charges processed any time after that will be deductible on next year’s return.
- If you are making donations through the mail, your donation envelope must show a postmark on or before December 31. Because the U.S. Postal Service offices (and many other mail services) are not open on Sundays, any paper check or credit card donation forms you mail this year must be postmarked by December 30 to be tax-deductible for 2017.
- If you are donating stocks, stock funds, or retirement account assets (in lieu of taking a RMD), the effective delivery date is the date when the gifted assets are no longer in your control.
For example, if you’re donating shares of a stock to a Donor Advised Fund (DAF), the value of the stock gift is deductible when the transfer is “on the books” of the DAF. That means you should check with your financial institution as to length of time for the transfer of the donated stock. Custodians delivering and receiving securities have different timeframes for delivery and receipt. You will want to make sure that the stock is delivered to the receiving charity on or before December 29.
Also, because stocks, investments, and other assets can fluctuate daily, the date of delivery will determine the gift’s value and whether it is considered long- or short-term property.
- If you are donating real estate or other real property, the donation is usually effective once the deed to the property is transferred and recorded by the charity at the local registry of deeds.
Getting the right documentation
For all donations, you’ll need a receipt or acknowledgement by the date you file your tax return for the year in which you make the contribution (or the date you file your extended return).
- For any monetary contributions you make, you’ll need a bank record, such as a cancelled check, or a receipt, letter, or email from the charity showing their name and the date and amount of your contribution.
- For individual donations of $250 or more you’ll need a formal, written acknowledgment from the charity. If you’ve made several donations of $250 or more to a single charity, you should receive a combined acknowledgment listing the amount and date of each of those contributions.
- If you make a monetary donation that also pays for goods and services you receive, such as a fund-raising dinner, a sports event, or a donation that entitles you to a free gift, your deductible contribution is the amount of the payment that is more than the value of the goods and services you receive. The charity you contribute to will usually show in their acknowledgement how much of your donation is not deductible.
For more on the IRS’ documentation requirements for donations of money, in-kind services, and unreimbursed travel expenses on behalf of a charity see their publication Charitable Contributions Substantiation and Disclosure Requirements.
Donations of non-cash assets to charity—including securities, real estate, or tangible personal property (such as art and collectibles); cars, boats, or airplanes; clothing or household items; food inventory; or intellectual property—are subject to other IRS rules and requirements and should be discussed with your tax advisor.
The opinions expressed and information contained in this article are given in good faith, may be subject to change without notice, and are as of the date issued. The accuracy and completeness of this information is not guaranteed. Since each client’s situation is unique, please review your specific investment objectives, risk tolerance and liquidity needs with your advisor before a suitable investment strategy can be selected.
- Tax Planning