On Giving Tuesday, charities, families, businesses, community centers and students around the world celebrate generosity and give money to worthwhile causes. On this day dedicated to giving back, a pair of CPAs have some advice for those who are planning their end-of-year charitable giving.
If there is one conversation we should be having with our clients between now and the end of the year, it is charitable giving, Fred Slater, CPA, and a partner at tax prep firm MS1040 in New York, said in a statement.
Clients have to know of their charitable options between now and December 31st," said Slater, who emphasizes the importance of consulting with a tax advisor when planning year-end contributions. "Higher income and capital gains tax rates make it more beneficial now for clients to engage in charitable giving. Many clients are also much wealthier than they were five years ago, with large unrealized capital gains in their portfolio.
Ellen Minkow, CPA, also a partner at MS1040, contributes a high percentage of her income to charities at year-end. She actively supports the arts through regular contributions to the Manhattan Theatre Club and the New York City Ballet. Minkow also encourages her clients to make tax deductible year-end contributions.
Minkow and Slater offer the following guidelines for year-end charitable contributions:
To deduct any charitable donation, you must have a bank record, credit card statement or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements showing the name of the charity, the date, and the amount paid.
Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deductions. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by their employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
For individuals, only taxpayers who itemize their deductions on Form 1040, Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction.
For all donations of property, including clothing and household items, obtain a receipt from the charity that includes the name of the charity, the date of the contribution, and a reasonably detailed description of the donated property.
Michael Cohn is the Editor-in-Chief of AccountingToday.com.
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