If you are considering providing charitable gifts, you may wonder: Are gifts tax deductible? Some gifts do allow the giver to take tax deductions, but you need to follow the rules. Learn more about common gifts you can deduct when completing your income taxes.
Cash and all your gifts combined are deductible on your income tax return up to 60% of your adjusted gross income (AGI) in a certain tax year. However, you must donate the money to a qualified organization and itemize your deductions on your tax return.
Depending on your particular income tax situation, you may have a limit of 20%, 30%, or 50% in gifts to a qualified organization based on your AGI. The AGI is one of the lines of your federal tax return. It can sometimes be difficult to calculate your AGI and determine how much you could give in a cash gift to a qualifying organization. Your AGI may change based on the number of gifts you receive.
Your tax preparers or CPAs can help you determine whether you have any limitations for a cash donation. They also can help you determine whether your AGI calculation will change based on the cash gifts you want to give.
Attempting to give gifts of stocks and bonds frequently generates questions about whether such gifts are tax deductible. You must understand fair market value and appreciation of the bonds, stocks, and assets to determine how much you can deduct from your taxes. You also must give up all voting rights for the stocks to give them as a gift.
You typically can give property to a qualifying organization as a gift and receive a tax deduction. However, you must determine the fair market value of the property at the time of the gift. Whether you are gifting vehicles or other types of property, you could potentially deduct the fair market value.
Are gifts tax deductible when they come from your old business equipment purchases? If you give a gift of old computers or furniture to a qualifying organization, you could only write off the fair market value of the items. If you fully depreciated the equipment on your tax return in the past, you cannot claim a pass-through deduction now for the gift.
If you want to take a tax deduction when gifting collectibles to a qualifying organization, you must hold the collectible for at least a year. Some limitations occur on how the gift recipient can use the collectible as well.
If you are planning to try to give your collectibles as a tax-deductible gift, you may want to reach out to a tax preparation company with CPAs. If you don’t follow the specific rules the IRS has for collectibles, you could end up with a tax return mistake that negates your attempt to deduct the value of the collectibles.
When you are providing a cash gift or another gift, you may want to deduct the amount of the gift on your income tax forms. Are gifts tax deductible in every circumstance? Gifts are only tax deductible for you as the giver when you follow the IRS guidelines for gift giving. These guidelines change regularly, so it’s important to understand the latest rules.
If you are unsure how to structure your gift to ensure it delivers the tax deduction you are seeking, reach out to Levy & Associates. Our professionals can provide this advice as well as other tips for tax relief. For guidance, call us today at 313-447-1704 or fill out our contact form.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
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