Giving to Charity Has Great Benefits
Giving to your church is a call from God. There are many scriptures in both the Old and New Testaments that give us God’s direction to generously support His church.
But the need for giving and for generosity goes much deeper. The call of God is also for believers to help those in need. Proverbs 29:7 states that generosity to the poor will be repaid by the Lord. God’s Word tells us to give generously, to give joyfully, and to support both our church and those in need. Jesus said to His disciples “when you give” not “if you give” (Matthew 6:2). Christian giving is an opportunity and a privilege. Paul wrote that “God loves a cheerful giver.”
Giving should always be from the heart, not from a feeling of compulsion or pressure. However, there is no reason why your giving should not be done in a manner that gives you the greatest tax benefits and at the same time, gives the greatest amount of your gift to the charity and not the government. To understand this, consider the following:
Non-Cash Donations Potentially Have the Greatest Tax Benefit
The most common gift is cash. The next most common is used household items such as clothing, furniture and electronics. But cash is often the least tax-wise gift because your available cash is normally after-tax cash, meaning you have already paid taxes on it. Instead of cash, consider these options:
- Real Estate
If you own real estate that has appreciated in value since the date of purchase, not only can you deduct the fair market value of the property (if you have owned it for at least one year), but you can also avoid paying capital gains tax on the amount of the appreciation. Normally, appreciated property is subject to capital gains tax upon sale. But for donations to charities, there is an exception. You get the benefit of the appreciation in your deduction and pay no capital gains taxes!
If you own stock that has appreciated in value since the date of purchase, you deduct the current market value of the stocks (if you have owned it for at least one year), and also avoid paying capital gains tax on the amount of the appreciation. As with real estate, you get the benefit of the appreciation in your deduction and pay no capital gains taxes!
- IRAs and Qualified Retirement Plans
You may be able to list a charity as a beneficiary or contingent beneficiary of an IRA or other qualified retirement plan. There is also another tax tool called a charitable IRA rollover. An IRA rollover, or Qualified Charitable Distribution (QCD), comes from a special provision in the tax code allowing certain donors to exclude from taxable income and count toward their Required Minimum Distribution (RMD) certain transfers of IRA assets that are made directly to public charities, including Idlewild Baptist Church. Contributions like this are complex and require professional assistance.
- Required Minimum Distributions
Required Minimum Distributions from IRA’s begin when you reach age 70 ½. There are times when that income from an IRA may put you into a higher bracket. The additional income may cause you to end up with less money; not more. While you cannot donate the entire IRA to a charity under current law, you can donate the some or all of the RMD payment and receive a deduction that will keep you in the same tax bracket.
- Personal Items
Personal property rarely appreciates in value (with collectables making up the vast majority of the exceptions here). But personal items you are not using and that is merely taking up space may have a fair market value you can deduct. Those tools you no longer use, that suit that no longer fits, that couch that doesn’t really fit with the new colors you painted the room; they all have a fair market value that you may be able to deduct after you donate them to a qualified charity.
How to Ensure These Deductions
- What matters is the date the gift is given. A check in the mail postmarked by December 31, delivery of goods to a truck or center for donations with a receipt dated December 31, a credit card donation that is charged to your credit card by December 31 (even though you may not pay your credit card company until the next year) all constitute acceptable deductions for the IRS.
- Not every “charity” is legitimate. Charitable contributions are valid only if they are made to or for the use of a qualified recipient. Do your homework and be sure you are giving to a known charitable organization. Check the website of the charitable organization to view the 501(c)(3) letter from the IRS. The IRS also has a site you can search, which is IRS Exempt Organizations Select Check.
- There are limits to how much you can deduct. For the average tax payer, the limits on charitable contributions are sufficiently high and should not be of any concern. If donations are made to public charities, the deduction is limited to 50% of your adjusted gross income (AGI). Your AGI can be found on your tax return. For example, if you have an adjusted gross income of $80,000, your allowable deduction for that year is $40,000. Consult with your CPA, tax adviser or qualified professional if you have any concerns.
- Documentation is essential. Without documentation there may be no deduction. You are required to have written confirmation from the charity for a separate contribution of $250 or more. A canceled check alone is not sufficient documentation. Even if the contribution is to a religious organization solely for an intangible religious benefit (such as tithing), written proof is still required. All non-cash contributions require a receipt from the charity and an estimate the fair market value of any items given by you.
- You must itemize. To claim a charitable deduction on your tax return, you must itemize your deductions.
God calls us to be charitable and to give with a joyful heart. By giving charitable donations you are helping those in need and you will be blessed by our Heavenly Father, who gave us His only Son. And that is the greatest gift of all!
About the Author
John Campbell has retired from a 40-year legal practice as a trial attorney in Tampa. He has served in multiple volunteer roles at Idlewild Baptist Church in Lutz, Florida, where he met Jesus. He began serving as the Executive Director of the Idlewild Foundation in 2016. He has been married to the love of his life, Mona Puckett Campbell, since 1972.