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It’s tax season in America, and regardless of how we give, there are often tax considerations as well.   If you are making donations, cash or otherwise, there may be deductions available that can lower the taxes you must pay on your income.  For larger donations of cash or valuable property, there may be limitations on the deductibility of such gifts based on your income.  It is also important to note that unless you are making donations to qualified charitable organizations or non-profit entities, you may be making a gift that will incur taxes…. that is taxes that you must pay to the IRS based on the size of the gift!  As an example, if you give your child or neighbor $20,000- you may have an obligation to file a gift tax return, and possibly even taxes to pay!  For 2007, we can give up to $12,000 per individual or entity tax free.  But above that amount you may have to file a gift tax return, although there is a lifetime gift exclusion of $1,000,000 at present.  It’s important to know that handing money around freely may have tax ramifications.   It may be wise to see your tax planner or CPA to assess your current situation and make an informed decision that benefits both the charity and your tax liability.  Here’s a list of useful links on taxes and charitable giving:

• Fairmark’s Tax Guide has an excellent multi-page overview of the Tax Rules for Gifts.
• A short overview on tax considerations is discussed in The Tax Perks of Charitable Giving from SmartMoney.com.  
• For those who may make larger cash donations and have trust or estate planning concerns, T. Rowe Price has a nice overview of The Tax Value of Charitable Giving.
• For detailed tax regulation information, see the most current IRS guidelines found in IRS Publication 526 (this is a .pdf file- if you need Adobe Acrobat Reader, you can find it here).

Filed under: Tax Issues