For the man or woman who has everything, donations can make a great gift. Instead of another fondue pot or a gift card, you can give money to their favorite charity in their name. What you can't do is give them the tax deduction for the donation. The IRS says someone can deduct contributions he makes to charity, not contributions someone else makes.
If you donate to charity in someone's name, you are able to claim the tax deduction, not the person whose name the donation is in.
Donation in Someone Else's Name
Technically, what you get is a deduction, not a credit. If, say, you give $1,000 to charity in your son's name, you have a potential $1,000 deduction from your taxable income. To have an actual write-off, you have to itemize your deductions. If you take the standard deduction while your son itemizes, too bad: neither of you gets to claim the write-off.
Even if you itemize, you don't get a write-off if you give to the wrong group. It has to be an organization the IRS considers eligible for tax-deductible donations or it's a no-go. Most churches, nonprofit schools and hospitals, government bodies and nonprofit charities qualify. The organization you want to donate to can tell you if it qualifies, or you can look it up online on the IRS' charity-finder website.
If you give cash, the value is simple: $500 in cash is a $500 deduction. Property is more complicated. Clothes or furniture that aren't in good condition aren't worth anything as a write-off. Valuable items – a car, jewelry, collectibles – usually give you a deduction equal to the purchase price, even if they've gone up in value since you bought them. If you donate time or professional services, the IRS rules out taking a write-off for such things, whether it's a donation in honor of someone else or not.
You need proof you made the donation, in case the IRS ever audits your return. The basic for any donation record is something – a receipt or a canceled check, for instance – showing the name of the organization, the date you donated and the amount. Above $250, you also need a written acknowledgment from the group. If you donated property worth more than $500, you need an explanation of how you figured the value.
Donation and Gifts
If you give another person money and they donate it to charity or do something else of their choice with it, keep in mind that you may end up owing tax, though only if the gift is quite large.
As of 2018, you can give up to $15,000 in gifts per person per year without any tax ramifications. That's up from $14,000 the previous year.
After that, gifts begin to eat into a lifetime exemption of $11,180,000 that includes gifts you give beyond the annual exemptions as well as anything you leave behind in your estate when you pass away. Gifts to spouses and to charitable organizations are never taxable. You must file a gift tax return using IRS Form 709 on gifts that exceed the annual limits even if they're under the lifetime gift tax exemption.
2018 Tax Law Changes
The annual gift tax exemption is up to $15,000 in 2018 and the lifetime exemption is $11,180,000.
For charitable gifts, you still must itemize your deductions to claim the donation as a deduction, which is generally only worth it if you will have more than the standard deduction to claim. The 2018 standard deduction is $12,000 for single filers and $24,000 for married couples filing jointly.
2017 Tax Law Scenarios
As of 2017, the standard deduction was $6,350 for individuals and $12,700 for married couples filing jointly, meaning more people can benefit from itemizing. The annual gift tax exemption was $14,000 and the lifetime exemption was $5,490,000.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.