|
Charitable Giving - tax treatment
Giving of our financial wealth allows us to share
with others a portion of our many blessings. There are many ways
to make charitable gift contributions and reduce your taxes. Your
gift may be directed to various church funds, including CUMC's
Foundation. As the church endeavors to carry out its
ministries, your gifts to the Foundation Fund will support its vital work for
generations to come.
Important tax information is
available below to assist you with charitable giving decisions.
You will find information about donating publicly-traded
securities (Stock Donations) and new rules
for donating cash and non-monetary goods (Charitable
Reform). There is also a
discussion of the donation to a charity that can be made directly from
qualifying individual IRA accounts.
Our church accountant, Mike Parmelee, CPA, has provided this information
and is willing to answer any questions you might have.
Neither the church nor Mr. Parmelee can
provide you direct tax advice through these discussions. Your
individual tax situation and effects of contributions can only be
determined through consultation with your own professional tax adviser
who is familiar with your individual tax situation.
Stock Donations to CUMC
A Message from Mike Parmelee, CPA and Church Accountant
(updated 2/15/11)
There are two primary issues regarding a donation of publicly-traded stock to
Community United Methodist Church (CUMC). The two basic issues involved
are the income tax laws and the actual process to accomplish the
transfer.
With regard to the income tax
laws, the following is a very brief discussion of the rules for
charitable donations:
1. The amount of your deduction
is the fair market value of the stock (determined by taking the average
of the high and low on the date you transfer ownership to the church).
(If it is a mutual fund, it would be the net asset value on the transfer
date.) What the church sells it for or what you paid for the stock does
not determine the amount of the contribution. This provision applies to
securities held for more than one year (commonly called long term).
2. Because your contribution
amount is the current value of the stock, you would normally only want
to donate stock that is appreciated (has increased in value over its
original cost or basis) and not stock that has depreciated (stock that
has declined in value from its original cost). If stock has declined in
value, you would generally be better off selling the stock first,
getting a tax deduction for the loss, and then donating the cash. When
you donate appreciated stock, you do not have to include in taxable
income the "paper gain" or the difference between the current value and
your cost. This is why stock donations can potentially be more
beneficial to you than cash donations.
3. You will be issued a receipt
by the church indicating the stock that was donated. It is your
responsibility to claim the deduction and file the appropriate forms
with your tax return.
4. Your contribution is
deductible up to 30% of your adjusted gross income on your tax return.
If the amount of the donation exceeds 30% of your adjusted gross income,
you can carry the excess over for up to five years. There is a special
election to deduct up to 50% of your adjusted gross income in certain
circumstances.
5. As with any donation, whether
you obtain a tax benefit for the deduction depends on the amount of the
contribution and your individual tax situation. You should always
consult your own tax advisor for advice and projections to determine the
effect on your individual situation.
6.
This discussion is not intended to provide you specific tax advice, but
to give you a brief understanding of the basic rules. You are advised
to consult with your personal tax advisor to determine the effects on
your income tax situation and whether donation of appreciated stock has
any benefit to you. The Church cannot offer you specific tax advice.
With regard to the way you would
proceed to accomplish the transfer of stock:
1. If you have a stock
certificate in your possession that you wish to transfer, you should
send the stock certificate by certified mail to the church or deliver it
to the church to the attention of the CUMC Treasurer. You should
accompany the certificate with a letter, signed by all of the named
owners on the certificate, indicating your desire to donate the stock to
Community United Methodist Church for placement in our securities
account at Smith Barney (Account
52B-08705-1-2-608). Your letter should
also specify the CUMC fund that is to receive your gift: Foundation
Fund, General Operations, or any fund of your choice. You will then
be sent a stock power by our broker for you to sign. If you obtain a
stock power from your own broker, you should mail it in an envelope
separate from the certificate itself.
2. If you want to transfer
securities from a brokerage account (commonly called stock held in
street name), you would instruct your broker to transfer the securities
to DTC #0418, Citigroup Global Markets, FBO Account
52B-08705-1-2-608,
Community United Methodist Church. If you or your broker has questions
on the transfer or needs assistance with the transfer, contact Citigroup
broker Michael Cunningham, (310) 727-9533. You should also direct a
donation letter to the church, attention Financial Secretary,
so that the church can make sure the transfer took place properly and
you receive proper credit for the donation. Your donation letter should
specify the CUMC fund that is to receive your gift: Foundation Fund,
General Operations, or any fund of your choice.
If you have any specific questions
not dealt with here, you can either contact the broker named above or
call the church office and they can direct you to someone who can assist
you.
Top of Page
Substantiating Charitable
Contributions by Individuals
A Message from Mike Parmelee, CPA and
Church Accountant
(updated 2/15/11)
This article contains information to assist you in substantiating your
charitable contributions. While all contributions must be substantiated,
contributions of $250 or more require a written receipt from the
charity. If you donate property valued at more than $500, additional
requirements apply.
General rules.
If you claim a deduction for a charitable contribution you must maintain
reliable written records regarding the contribution, regardless of the
value or amount of the contribution. For a contribution of money, you
generally must maintain a bank record or a written communication from
the donee showing the name of the donee organization, the date of the
contribution, and the amount of the contribution. It's not sufficient to
maintain other written records, such as a log of contributions. (This
means you can no longer claim cash donations to any charity without
having a cancelled check (or electronic facsimile thereof) or a receipt
from the charity). If you place cash in the collection plate and you
want to be able to claim a deduction for it, you must place it in an
envelope with proper name and address information so the charity can
issue you a receipt. If you place a check in the collection, be sure
the address and contact information on the check is correct.
For a contribution of property
other than money, you generally must maintain a receipt from the donee
organization showing the name of the donee, the date and location of the
contribution, and a detailed description (but not the value) of the
property. Under new
rules, donations of property can no longer be claimed for items of
minimal value. While there are no specific items listed for this, you
can assume you may potentially not claim deductions for things such as
used underwear, etc. (food donations are still okay). Additionally,
the property donated must be in good used condition or better. No
property in poor condition is deductible. You should document the
condition as best you can either by written notes or perhaps pictures.
Under those circumstances, you must maintain reliable written records
regarding the contribution. The required content of such a record varies
depending upon factors such as the type and value of property
contributed. The above rules related to minimal value, condition etc.
do not apply to property donations in excess of $500 if you have a
qualified written appraisal of the item(s).
Stricter substantiation
requirements apply in the case of charitable contributions with a value
of $250 or more. No charitable deduction is allowed for any contribution
of $250 or more unless you substantiate the contribution by a
contemporaneous written acknowledgement of the contribution from the donee
organization. (This means that if all you have for support is your
cancelled check, that is not good enough under the current rules). You
must have the receipt in hand by the time you file your return (or by
the due date, if earlier) or you won't be able to claim the deduction.
The acknowledgement from the donee
must include the amount of cash and a description (but not value) of any
property other than cash contributed, whether the donee provided any
goods or services in consideration for the contribution, and a good
faith estimate of the value of any such goods or services that you did
receive. If you
received only “intangible religious benefits,” such as attending
religious services, in return for your contribution, the receipt must
say so. This type of benefit is considered to have no commercial value
and so doesn't reduce the charitable deduction available. However, if
you receive any other benefits in return, your donation deduction cannot
be for the full amount of the payment.
If you make separate or periodic
contributions of less than $250, you won't be subject to the requirement
to get a written receipt, even if the sum of the contributions to the
same charity total $250 or more in a year. (Although you cannot
purposely give several donations of less than $250 in close proximity to
each other with the intent to avoid the $250 single limit rule). Also,
if you have contributions withheld from your wages, the deduction from
each payment of wages is treated as a separate contribution for purposes
of the $250 threshold.
In general, if the total
charitable deduction you claim for non-cash property is more than $500,
you must attach a completed Form 8283 (Non-cash Charitable
Contributions) to your return or the deduction is not allowed. In
general, you are required to obtain a qualified appraisal for donated
property with a value of more than $5,000, and to attach an appraisal
summary to the tax return. A qualified appraisal isn't required for
publicly-traded securities for which market quotations are readily
available. A partially completed appraisal summary and the maintenance
of certain records are required for (1) non-publicly-traded stock for
which the claimed deduction is greater than $5,000 and no more than $10,000,
and (2) certain publicly-traded securities for which market quotations
are not readily available. A qualified appraisal is required for gifts
of art valued at $20,000 or more. For any non-cash donations to a
charity, the charity is not allowed to value them for you, regardless of
amount, except for publicly-traded securities. Determining the value of
the gift is your responsibility. However, if you do obtain an appraisal
for any gift of property to the church, they may ask you for a copy of
the appraisal to assist with the valuation of the gift for church
purposes and to assist them in determining whether to accept the
non-cash gift.
Recordkeeping for contributions
for which you receive goods or services.
If you receive goods or services, such as a dinner or performance
tickets, in return for your contribution, your deduction is limited to
the excess of what you gave over the value of what you received. For
example, if you gave $100 and in return received a dinner worth $30, you
can deduct $70. But your contribution is fully deductible if:
-
you received free, unordered
items from the charity that cost no more than $9.60 in 2010
($9.70 in 2011)
in total;
-
you gave at least $48 in 2010
($48.50 in 2011)
and received only token items (bookmarks, key chains, calendars,
etc.) that bear the charity's name or logo and cost no more than
$9.60 in 2010 ($9.70 in
2011) in total; or
-
the benefits that you received
are worth no more than 2% of your contribution
and no more than $96 in 2010
($97 in 2011).
If you made a contribution of more
than $75 for which you received goods or services, the charity must give
you a written statement, either when it asks for the donation or when it
receives it, that tells you the value of those goods or services. Be
sure to keep these statements.
Also remember that if you purchase
goods or services at a charity auction, chances are you may have no
charitable deduction. Your only deduction would be the difference
between the amount you pay over the amount of goods or services you
receive in return, and you would have to get a receipt from the charity
as detailed above. Also, payments made for the purchase of raffle
tickets or "chance" tickets are never deductible.
Cash contribution made through
payroll deductions. A contribution that
you make by withholding from your wages may be substantiated by a pay
stub, Form W-2, or other document furnished by your employer that shows
the amount withheld for the purpose of a payment to a charity. You can
substantiate a single contribution of $250 or more with a pledge card or
other document prepared by the charity that includes a statement that it
doesn't provide goods or services in return for contributions made by
payroll deduction.
The deduction from each wage
payment of wages is treated as a separate contribution for purposes of
the $250 threshold.
Substantiating contributions of
services. Although you can't deduct the
value of services you perform for a charitable organization, some
deductions are permitted for out-of-pocket costs you incur while
performing the services. You should keep track of your expenses, the
services you performed and when you performed them, and the organization
for which you performed the services. Keep receipts, canceled checks,
and other reliable written records relating to the services and
expenses. This also includes mileage for charitable work at the
specified annual charity mileage rate (which is different from mileage
rates for business use).
As discussed above, a written
receipt is required for contributions of $250 or more. This presents a
problem for out-of-pocket expenses incurred in the course of providing
charitable services, since the charity doesn't know how much those
expenses were. However, you can satisfy the written receipt requirement
if you have adequate records to substantiate the amount of your
expenditures, and get a statement from the charity that contains a
description of the services you provided, the date the services were
provided, a statement of whether the organization provided any goods or
services in return, and a description and good-faith estimate (by you,
not the charity) of the value of those goods or services.
This discussion is not intended to
provide you with specific tax advice. You are advised to consult with
your professional tax advisor to determine the effects on your income
tax situation and whether contributions of any type have any benefit to
you. The Church cannot offer specific tax advice.
This information was prepared by
Mike Parmelee, CPA and Church Accountant. If you would like to discuss
it or need additional information, please call the church office.
Top of Page
Donations to CUMC directly from
your IRA Account
A Message from Mike Parmelee, CPA and
Church Accountant
(updated 2/15/11)
A
change in the tax law was made late in 2010 that reinstated through 2011
the ability to make a direct contribution from your IRA to CUMC or other
qualified charity. If you qualify to do this, then the distribution
from your IRA account (even if it is your required minimum distribution
or RMD) is not includable in income in the year received. (However,
neither do you receive a charitable donation deduction for the amount
because you can not “double dip” on the exclusion). The potential
advantage to you of using this procedure if you qualify is that by not
including the IRA distribution in your income you reduce your Adjusted
Gross Income which can potentially increase some of your other itemized
deduction amounts because of income limitations, it can possibly reduce
the amount of Social Security income that is taxed on your return
depending on your other income received, and it can potentially reduce
your taxable income if you are a non-itemizer who never got full or
partial benefit from your charity deductions because you used the
standard deduction. Only a detailed calculation of your tax situation
can determine if this opportunity would be beneficial to you.
The basics of the rule provide that you can exclude from income up to
$100,000 of qualified charitable distributions for the years 2006-2011.
A qualified charitable distribution is one made by your IRA trustee
DIRECTLY to a charitable organization or donor advised fund AND
it is made on or after the date on which the individual for whose
benefit the IRA is maintained has attained the age of 70 ˝. If you
maintain multiple IRA accounts, the $100,000 is an aggregate limit for
all accounts and cannot be used for each separate account. For married
individuals filing a joint return, the limit is $100,000 per individual
IRA owner. There is no carryover provision, so if you exceed the
$100,000 limit in any year, the excess amount must be included in income
for that year.
The transfer from your IRA account must be made directly from the
trustee of the IRA to the charity. You cannot receive the distribution
and then roll it over to the church. If you do, the income will not be
excludable even though the church ended up receiving the funds. If you
receive from the church or charity a donation letter for your
contribution credited to you, if you use the income exclusion you cannot
also then take the contribution deduction even though you have a
donation letter.
There are potential special rules for non-traditional IRA’s such as ROTH
IRA’s, SEP IRA’s and SIMPLE IRA’s. You should consult your tax advisor
for the rules regarding these if they affect your situation.
This discussion is
not intended to provide you with specific tax advice. You are advised
to consult with your professional tax advisor to determine the effects
on your income tax situation. The Church cannot offer specific tax
advice.
This information was
prepared by Mike Parmelee, CPA and Church Accountant. If you would like
to discuss it or need additional information, please call the church
office.
Top of Page |
