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Charitable Contributions: Timing is Everything

December 21, 2015

Be mindful of unique IRS rules when making gifts of cash, stock, and other non-cash contributions to charities.

It is important to comply with the IRS regulations when it comes to reporting your charitable donations. Different types of charitable gifts have different requirements when it comes time to determine the date your contribution was actually made and in what year it can be deducted.

Things to keep in mind when making charitable donations

Gifts of Cash

  • If a cash donation is made, the contribution is considered to be made at the time of delivery.
  • If the donation is made via check, the donation is deductible in the year that the check is mailed.
  • If a charitable contribution is made via credit card, the donation is considered complete when the charge is made. This rule applies even if the credit card bill is not paid until the following year.

Gifts of Stock

  • A gift of stock or securities is complete as of the date you either mail or personally deliver an endorsed stock certificate to the organization.
  • If the gift of stock is made via brokerage transfer, it is not considered complete for tax purposes until the stock is actually transferred to the organization.
  • The amount of the deduction will be the average mean value (average of the high and low price the stock was traded at that day) on the date the stock contribution is considered complete for tax purposes, per the rules listed above.

Other Non-Cash Contributions

  • Donations of household items, clothing etc., are deductible in the year the items are delivered to the charity.
  • This rule also applies if the donations are left at an organization’s unattended drop site.

Proper documentation

The IRS encourages that you keep accurate records with any contributions made. Check out our blog: “Charitable Giving: Proper Substantiation is Key”. There are specific documentation requirements for cash and property donations that exceed a certain threshold. You should acquire an acknowledgement letter from the charitable organization whenever possible, even if the donation amount is under the IRS required documentation threshold. Accurate records and acknowledgement letters will only further substantiate the date the contributions were made. You will not want to be caught trying to make sense of incomplete records of your contributions.

Questions? Contact any member of our Private Client Services Group.

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