Non-Cash Charitable Donations
Many investors will seek to offset potential tax liabilities by maximizing charitable donations. Making non-cash contributions can be a great way to do so. Following are answers to commonly asked questions regarding charitable donations.
Q: What are the requirements for using charitable donations to offset my tax liabilities?
A: Charitable donations can only be used to reduce your tax liabilities if you itemize deductions on your tax return. Typically, you would itemize if the combined total of your anticipated deductions, including charitable contributions, equals more than the standard deduction (in 2021, $12,550 for individuals, $18,800 for heads of households and $25,100 married filing jointly1).
To be eligible for a charitable deduction, the contribution must be made to a qualified organization. Gifts to individuals are never deductible. Also, if you receive a benefit from the contribution to the qualified organization, such as admission to an event, goods or services, you are only eligible to deduct the amount that exceeds the fair market value of the benefit received.
Q: How can I deduct non-cash donations?
A: For any non-cash charitable contribution of $250 or more, you must maintain a receipt from the qualified organization.2 In addition to providing a description of the donation, this receipt must also state whether any goods or services were provided in exchange for the donation as well as the value of such goods/services.
If the amount of the non-cash donation is greater than $500, the IRS requires you to include Form 8283 with your tax return. If the amount of the non-cash donation is more than $5,000, you will also need a qualified appraisal of the non-cash property.2
Q: Is there a limit to the amount I can deduct?
A: Yes, and the limit varies based on the type of charitable organization that receives your donation.
- When you make donations to public organizations such as churches, educational institutions and hospitals, your total charitable deduction (including both cash and non-cash donations) cannot exceed 50% of your adjusted gross income (AGI).
- When you make donations to private organizations such as veterans’ groups, fraternal societies, nonprofit cemeteries and certain private foundations, the maximum deduction cannot exceed 30% of your AGI.3
For assistance with reporting your non-cash charitable donations for tax purposes, consider reaching out to your wealth advisor who can coordinate with your tax professional to help minimize your tax burden.
The views expressed are for commentary purposes only and do not take into account any individual personal, financial, or tax considerations. It is not intended to be personal legal or investment advice or a solicitation to buy or sell any security or engage in a particular investment strategy.
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