Tax Deductibility of Designated Gifts
Designated gifts are generally not tax deductible. A designated gift is money or property given directly or indirectly to a specific individual or for a specific purpose. Even if you give money to a charity but specify the use of the funds for an individual in need, it’s likely considered a designated gift and it is not tax deductible.
To be deductible, gifts must generally be given so that the organization has full control over them.
When a church asks for donations to help an impoverished parishioner pay for medical care, you may write a check to the church. But since the money is earmarked for an individual and, in this example, also for a specific purpose, IRS rules on church designated funds apply. Your donation is not tax deductible.
Another example of non-deductible contributions are those made to an organization that is not an organization that is not registered with the IRS as a 501(c)(3). A 501(c)(3) operates to help a cause and not to make a profit.
Exceptions for Non-Designated Gifts
Money or property you give freely to any charity registered under the IRS’s Code 501(c)(3) is tax deductible. Nearly all churches, temples and other religious organizations are in this category. Nonprofit schools and hospitals, as well as veterans’ organizations, also qualify. To find out if an organization is a registered charity, you can use the IRS’s online Tax Exempt Organization Search. You can search by the organization’s name or tax identification number, also known as an employer identification number.
Deducting Non-Designated Gifts 2018
To claim charitable gifts on your tax return, you have to itemize your deductions. Itemizing is going to be tougher to do for 2018 because the standard deductions are a lot higher. The standard deduction for a single person is $12,000. It’s $18,000 for head of household and $24,000 for married couples filing jointly. Your deductions have to exceed these amounts in order for it to make sense to itemize. However, if you are able to itemize, the new tax laws allow larger deductions for charitable donations. For 2018 you can deduct cash donations that total up to 60 percent of your adjusted gross income. That’s up 10 percent from last year.
Form 1040 is redesigned for the 2018 tax year and most schedules are being tweaked to match it. Based on the drafts that the IRS has published, you’ll still use Schedule A to document deductible donations. After adding them up with the rest of your deductions, you’ll transfer the total to line 8 on the new 1040.
Deducting Donations for 2017
Standard deductions and, therefore, the thresholds for itemizing are much lower for 2017. If you’re single and your deductions are more than $6,350 for the 2017 tax year, it may benefit you to itemize. If you’re a single head of household your standard deduction is $9,350. If you’re married and filing jointly, it’s $12,700.
For 2017, you can deduct donations that total up to 50 percent of your adjusted gross income. You’ll document and add up all itemized deductions on 2017’s Schedule A. Then transfer the total from line 29 to 2017’s Form 1040, line 40.
- American Endowment Foundation.org: Charitable Giving After Tax Reform
- IRS.gov: Schedule A 2018
- IRS.gov: Tax Exempt Organization Search (Formerly Select Check)
- IRS.gov: Topic Number 506 - Charitable Contributions
- Church Law and Tax: Are Designated Gifts for Individuals Tax Deductible?
- The Motley Fool: Happy Holidays! The 2018 Gift Tax Exclusion Is Heading Higher
LeDona Withaar has over 20 years’ experience as a securities industry professional and finance manager. She was an auditor for the National Association of Securities Dealers, a compliance manager for UNX, Inc. and a securities compliance specialist at Capital Group. She has an MBA from Simmons College in Boston, Massachusetts and a BA from Mills College in Oakland, California. She has done volunteer work in corporate development for nonprofit organizations such as the Boston Symphony Orchestra. She currently owns and operates her own small business in addition to writing for business and financial publications such as Budgeting the Nest, PocketSense and Zacks.