Tis the season for giving, including end of year gifts to family, charity, and friends. In fact, your mailbox may be getting full from charities requesting funding. Hello again, Judy Bernhard, CPA, and Resident Tax Manager at Killingsworth Spencer CPAs. The first question to ask yourself is what is the purpose of the gift and how much do you want to give away? If your intent is to unload some cash to family or friends, the Annual Exclusion (AE) Gift is $18,000 per person in 2024 and is unlimited as to the number of gifts per Donor. No gift tax return is required to be filed. AE gifts are not tax deductible to the Donor, but they help to reduce the size of the taxable estate (if one exists).
If it is to a charity and you want to take a tax deduction, please check to make sure it is a registered 501c(3) charity. Go Fund Me donations are not tax deductible. Clothing and household items donations face 2 special rules:
- Deductions must be for items that are in good used condition or better, or
- A deduction can be taken when the item is not in good used condition, if a) it is for more than $500 and b) a qualified appraisal is included with the tax return.
A group of similar items can trigger the appraisal requirement.
In some cases, clients ask if they can gift property such as real estate, securities, or take extra money from their retirement accounts to a 501c(3) charity. The answer to all of these is yes; however, if you want to gift real estate or a security, it must first be appraised to establish its fair market value. Gifts from retirement accounts to charities are subject to special rules to qualify for the maximum tax benefit.
If you have questions about this or any other tax matter, please give Killingsworth Spencer CPAs a call at 770-552-8286t o schedule an appointment.
Disclaimer: This post is for general information only and should not be taken as legal or financial advice