Taxes & Giving

2018 Tax Cuts & Jobs Act Update

Going into effect in 2018, the Tax Cuts & Jobs Act has donors, nonprofits, and the media speculating about how tax changes will impact philanthropy. Why? Under the new tax law, the standard deduction for charitable giving was doubled, which experts project will remove giving tax incentives for ~90% of donors. The standard deduction is now $24,000 for couples and $12,000 for individuals. To learn more about the Tax Cuts & Jobs Act, click here.

Minnesota Taxpayers

Minnesota taxpayers can still receive a deduction on their state return. Here’s how- Minnesota taxpayers who do not itemize deductions on their federal income tax return, will still be eligible to take a deduction for charitable contributions on their state return. Minnesota’s Charitable Deduction provides a 50% tax deduction for total charitable contributions over $500. Contributions to 501(c)(3) organizations are eligible for the deduction, including public charities, churches, and faith organizations.

1)  Make sure your contribution is tax-deductible

All 501(c)3 organizations can accept contributions and offer donors a tax deduction to the full extent of the law. Make sure to ask an organization if they are a 501(c)3 organization before you make a donation.

2) Learn how to receive tax-deductions for your charitable donations

To claim deductions, you’ll need to fill out the tax form 1040 (the long form, which allows you to itemize deductions on Schedule A). You can find it on the IRS website. You don’t receive any tax breaks if you fill out the short form or take standard deductions.

Gifts of clothing or household items will be deductible only if the items are in “good used condition or better.” Single items for which the donor has received a qualified appraisal and taken a deduction of more than $500 are not subject to this rule. Nor are food, paintings, antiques, art objects, jewelry, or collections.

• Explore more about donating goods or vehicles here

Contributions of cash, checks, or other monetary gifts, regardless of amount, must be substantiated by a bank record or a written communication from the charity showing the name of the charity, the date of the contribution, and the amount.

3) Gifts of stocks and other securities

The best stocks to donate are those that have increased in value and that you’ve held for more than a year, particularly those producing a low yield. In order to preserve tax advantages, it is critical that the securities themselves are transferred to an organization rather than proceeds from a sale.

• Appreciated Securities or Mutual Funds – If you donate securities that have increased in value, you pay no capital gains tax and are entitled to a charitable deduction for the full fair market value of the stock.
• Depreciated Securities – Rather than contributing depreciated stock, sell the stock and contribute the cash for a charitable deduction.

4) A word about charitable events

If you attend a charitable event, you may be able to receive a deduction, but not for the entire price of the event- it’s important to ask what amount of your ticket or payment is tax deductible. Remember, goods or services that you receive at the event, such as dinner or entertainment, are not tax deductible. The organization hosting the event should be able to identify the exact value of the benefits you receive. After deducting that amount, the rest of the amount you paid for your ticket is deductible. Keep good records, and you’ll be in the clear!

5)  Deductions for volunteering

Although you can’t deduct the value of time or services donated to an organization, you can deduct any costs that are incurred during volunteering. These include gas mileage, parking or the cost of a volunteer uniform. It’s a good idea to keep a special notebook to write down costs and tape receipts for volunteering. You’ll have all the elements in one place for taxes and it’ll save you time.

6)  Understanding your tax benefit

The table below explains how the deduction for a single person who donates $100 to a nonprofit organization can affect his or her federal taxes. This is just an example, it’s wise to talk to your tax professional, or wealth professional about how your charitable giving influences your taxes.