Charitable Donations for Victims of Hurricane Harvey

August 29, 2017

By Jacquelyn R Campbell

When there is a natural disaster, we are inclined to help others in need in ways we can.  Donations of goods and money are the most common.  Although we don’t make those donations for tax reasons, a potential tax benefit will help your charitable dollars go further.

Here are a few tips for your donations:

  1. Make donations to a recognized charity. If you are not sure ask the charitable organization, check the online IRS tool, https://www.irs.gov/charities-non-profits/organizations-eligible-to-receive-tax-deductible-charitable-contributions or call the IRS at 1.877.829.5500.  Even if they are not on the list, some organizations (some exceptions apply), such as churches, temples, synagogues and mosques are eligible to receive deductible donations since they are considered de facto charitable organizations.
  2. Keep your donation receipts and a detailed list of your items. All cash donations must be substantiated by a cancelled check or receipt from your credit card.  Contributions of $250 or more are only deductible if you receive a written receipt from the qualified organization.  Non-cash donations also require written details and a receipt from the charity.
  3. Consider a Qualified Charitable Distribution (QCD). If you are 70 ½ and have an IRA, consider your donations directly to a recognized charity directly from your individual retirement account (IRA) as QCD.  This allows for a donation without counting the distribution as taxable income.

Qualified Charitable Distributions (QCD)

Up to $100,000 from your traditional or inherited IRA can go directly to a charity when you are 70 ½ years old.  Because a QCD is not taxable, it has no effect on your adjusted gross income (AGI), taxability of your social security income, Medicare premium costs and some other exemption and credit phase-outs on your individual tax return.

This differs from how you normally take distributions from your IRA as taxable income.  Typically, the additional income adds to your other income and increases your adjusted gross income (AGI).  Depending on your scenario, if you normally itemize deductions or claim the standard deduction, you have the potential to itemize your tax deductions and reduce your taxable income by the amount of your gift.  This results in higher taxes.

 

For additional information, please contact us at 352.683.7365 or email to info@mycpagroup.com.

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