End of the year charitable giving
Here are some practical notes and tips for you and your congregation to employ principles of good stewardship over the resources that God has entrusted to our care:
A payment by check is deductible in the year the check is mailed (postmarked before the end of day on December 31, 2018) or unconditionally hand-delivered to the church, by that same date. If a large contribution is mailed on December 31, it is also advisable to use certified mail and retain the receipt as documentation that your contribution was made before the end of the year.
Donors must substantiate individual cash contributions of $250 or more “by a contemporaneous written acknowledgement of the contribution by the church.” Donors cannot substantiate individual cash contributions of $250 or more with canceled checks. They must receive a written acknowledgement from the church or other charity with this wording: “no goods or services were received in exchange for this donation.” If this wording is not included if the donor is audited, the IRS may disallow the deduction.
A great way to make sure your end-of-year donations make the cut-off is to utilize online giving. For business owners or investors expecting an influx of income in the first part of the year, electronic giving provides a great option to maximize your tax deductions this year for income anticipated in early January 2019. The district office can guide you to some great options for implementing electronic giving in your church, including the use of “iPad kiosks” and “apps” for smartphones.
Encourage your people to consider donating appreciated assets.
Donating property that has appreciated in value, like stocks, can result in a double benefit. Not only can you deduct the fair market value of the property (so long as you’ve owned it for at least one year), you avoid paying capital gains tax. Normally appreciated property is subject to capital gains tax and disposition, but donations made to charitable organizations space the capital gains tax altogether.
Donating stocks, bonds or other monetary instruments
Stocks, bonds, annuities and certain other financial instruments (owned for more than one year) can be donated directly to the church.
Investors desiring to make donations to the church, but stand to incur tax consequences for cashing out these investments, may benefit greatly by donating their stock directly and allowing the church to cash out the investment. Doing so provides the following benefits:
The donor test a tax deduction for 100% of the fair market value of the asset, and does not have to pay (the often hefty) capital gains tax on the appreciated value.
The church can cash out the asset for the higher value and also avoids paying taxes because of our non-profit status.
These transfers are usually very easy to execute and made simply by filling out a form.
Donors in higher income tax brackets will face some important planning decisions as 2018 closes. Consider the following possible strategy:
Transfer assets to the church through a Charitable Remainder Trust. A charitable remainder trust (CRT) is a private fund that you set up to which you contribute. It provides you or the beneficiaries you select with taxable income for a certain number of years, or for life. Money that’s left over—the “remainder”—passes tax-free to one or more charities of your choosing. The significant benefit of these tools is that your contributions (of cash, investments or property) are tax deductible, based on the amount of money projected to go to charity and can be used to offset your taxable income distributions from the trust.
For more information about these options, visit Foursquare Financial Solutions planned giving website at: http://pg.4sqfs.org/
For Pastors: If you need advice on how to facilitate receipt of a stock donation to your church, please contact the District Office and we can send you information on option to process this donation.
If you have any questions or need additional information contact Allison Hester via email or call the office at (805) 498-1600 ext. 7012.