Category: Charitable Donations

Another method of donating to charity in a tax favored way is the donor-advised fund.  A donor-advised fund qualifies as a tax-exempt charity and therefore money can be placed in these accounts for an immediate income tax deduction.

These funds can grow tax free and then be directed to specific charities at a later date.

Donor-advised funds have been around since the 1930’s and have been established by community foundations and other non-profit organizations since that time.  Today these funds are growing in popularity and are now offered by financial institutions and all the major money management firms such as Vanguard, Fidelity and Charles Schwab to name a few.

Now for some caveats:  In exchange for the tax deduction, the donor loses control of these funds once the donor-advised fund is established.  In other words, the choice to contribute to these funds is irrevocable.  You or other co-advisors such as family members may still recommend grants (this is the “donor-advised” part).  The fund manager will generally comply with the owner’s advice but they are not legally obligated to do so.  Fees and costs are usually charged by the fund manager based on the amount of assets in the account.

In summary, donor-advised funds provide many benefits:

  • Immediate tax deduction
  • Tax-free growth
  • No annual payout requirements
  • No time restrictions for making donations
  • Simplicity of operation and professionally managed accounts

A donor-advised fund is an excellent vehicle for conducting your philanthropic goals while securing a tax deduction for yourself.  It is a lower cost and much simpler alternative to establishing a private foundation and an easy and flexible way to make charitable grants to the organizations that you want to support.

 

David K. Raye, CPA, P.C.

704-887-5298

www.davidrayecpa.com

 

*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation. 

The charitable contribution deduction has been a mainstay of the tax code for decades.  The current Republican House tax plan preserves only two deductions – mortgage interest and charitable contributions.  When North Carolina’s tax system was overhauled a few years ago, only three deductions survived and charity was one of them.  This coveted tax break is so popular that it is almost sure to survive any Federal tax reform efforts.  The following are a few ways that you can make a difference in the world while lowering your tax bill.

Contributions by cash or check

This is the most common method of giving.  The important thing here is to keep documentation supporting your gift.  The charity must provide written acknowledgement for any single gifts of $250 or more.

Non-cash donations

This is another popular way to give and would include donations of clothing, furniture and other household items to organizations like Goodwill or The Salvation Army.  If the fair market value of goods exceeds $ 500, then an additional schedule is required with your tax return to list details of the contribution (date, description, etc.).

Donation of appreciated property

Donated stocks or real estate can be a tremendous tax saver.  If given directly to the charity, you can deduct the full fair market value of the property and avoid capital gains taxes on the appreciation.

Donation of automobiles

Many charities accept donations of motor vehicles.  For donations over $500, the deduction allowed depends on how the charity uses the vehicle.  If the charity sells the vehicle, the deduction is limited to the proceeds of sale.  This amount would be provided by the charity on Form 1098-C.  If the car is given to a needy individual or used by the charity, then the deduction allowed is the fair market value of the vehicle.  You cannot claim a deduction above $ 500 unless the charity provides the Form 1098-C.

Charitable mileage

Transportation for charitable activities can be deducted as a charitable contribution.  The deduction amount is either the actual expenses or a standard mileage rate of 14 cents per mile.

For more information about these and other tax saving moves, please contact my office at 704-887-5298 or email me directly.

*The information in this blog post is general in nature and not intended as specific advice.  Please consult a tax advisor to see how this information applies to your specific situation.

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13850 Ballantyne Corporate Place, Ste. 500 Charlotte, NC 28277 Ph:(704) 887-5298

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