Salt Lake City Estate Planning

IRS Tips On Charitable Contributions

As individuals and businesses rush to make charitable contributions at this busy time of year, the IRS has issued several tips as reminders of tax law provisions that have taken effect in recent years. 

If you’re considering making last-minute charitable contributions before the end of the year, consider these tips from the IRS:

Charitable Contributions for Certain IRA Owners. If you are over age 70-1/2 and own an IRA, remember you can make a direct transfer tax-free of up to $100,000 per year to an eligible charity. Created in 2006, this provision expires at the end of this year.

Clothing and Household Items. Remember to get a qualified appraisal of clothing and household items if you plan to claim a deduction of more than $500. Household items include furniture, furnishings, electronics, appliances and linens.

Monetary Donations. Be sure you have a bank record or a written communication from the nonprofit that shows the name of the charity, the date and the amount of your contribution. If you want to deduct your donation of $250 or more, you must receive acknowledgment from the charity.

Go online to AdvisorOne for more tips and reminders.

Also, we would be happy to help you plan your year-end charitable gifts, or set you up with a long-term charitable giving plan using a private foundation, donor-advised fund, or other charitable giving structure.  Call, e-mail us, or visit our website pages for charitable giving for more information.

Voluntary Philanthropy – Look to Your IRA

[Qualified Charitable Deductions] can be used to satisfy the RMD requirement for the IRA owner. This means that the IRA owner who doesn’t need his or her RMD for income can direct the distribution to the charity of his or her choice.

If you would rather be a “voluntary philanthropist” versus an “involuntary philanthropist,” then you need to take action regarding the Qualified Charitable Deduction (QCD). In short, it’s a very powerful tool for both charity and reducing the tax liabilities associated with IRAs. However, on December 31, 2011, will we see it disappear?

Jim Blankenship at Forbes has recently pointed out that the very popular QCDs are not legally extended beyond 2011. As a result, we ought to take stock regarding whether the option will be around in 2012. As you may know, a QCD allows you to forgo taking your Required Minimum Distribution (RMD) by letting you redirect those funds straight to the IRS certified charity (or charities) of your choice. You can contribute as much as $100,000 per year.

It’s a pretty powerful tool for a “voluntary philanthropist,” if you don’t need the money from your IRA in the first place. Otherwise, taking the distribution just means more “T-A-X-E-S.” Note: Making this charitable beneficiary designation gives you an efficient way of contributing to charity and saving on your income taxes.

If you’ve taken advantage of the QCD this year, then you still have to ensure proper tax filing compliance.

Unfortunately, the only thing that can reinstate the Qualified Charitable Deduction is an act of Congress.

Reference: Forbes (November 7, 2011) “Last Chance for Making Charitable Contributions From Your IRA?”