Charitable giving is a great way to close out the year, and there are so many creative and impactful ways to do so. Whether you send a check to an organization that you value or you collect and distribute gifts to those less fortunate, charitable giving is what makes the holidays meaningful and connects us to others in ways we would not be able to otherwise.
I would like to take this time to remind you of some tax rules for gift-giving to charities. The basic rule is that a charitable gift is considered made on the “date of delivery.” This will determine (A) the tax year in which the gift is deductible; and (B) the value of the gift for assets that have appreciating and depreciating value.
The method for establishing the date of delivery depends on the type of gift contributed and how it is given to a charity. Here are a few of the most common types of gifts given to a charity:
- Gifts by check: Under the “mailbox rule,” the date of mailing to the charity is deemed the date of delivery if there are no restrictions on the time or manner of payment and the check is honored when presented. Thus, a donor will get a deduction on a 2017 income tax return for a check mailed via US postal services on December 31, even though it is not received by the charity until January 2018. When it is important to establish the delivery date, the donor should not rely on the postage meter; rather, the donor should mail the gift through the post office via certified or registered mail with a return receipt requested.
- Credit card gifts: Charitable contributions made using a credit card are deductible when the bank pays the charity. The gift is deemed made as of the date the bank mails, transfers, or delivers the funds to the charity. That date is shown on the bank’s monthly statement, but it might not be the date (or, more significantly, the year) that the donor directed the transfer. However, contributions made by text message are deductible in the year the text message is sent. A telephone bill showing the name of the charity, the date of the contribution, and the amount of the contribution will be proof of the date of the gift.
- Gifts of tangible personal property: The date the property is received by the charity is the delivery date. The title must also be transferred, if applicable.
- Real estate: The date the charity receives a properly executed deed is the delivery date.
- Pledges: For income tax purposes, pledges are deductible in the year they are fulfilled, not in the year they are made.
Don’t forget: You can also make gifts of up to $14,000.00 to an unlimited number of people before December 31, 2017, free from any federal gift tax consequences.
Happy Year-End Giving!