Forbes > Goldman Sachs & Veem partner. Learn more
Forbes > Goldman Sachs & Veem partner. Learn more
shutterstock_1022661760-donation

How Accountants Can Help Clients With Charitable Donations

Charitable organizations play a large part in our society. By supporting various noble causes, charities take on tasks that may otherwise be neglected. But to be able to do so, they need donations.

 

The recently adopted Tax Cuts and Jobs Act amended the rules for charitable donations. Accountants need to be aware of these changes to offer the best advice to their clients.

 

The US government helps people get in a generous spirit by offering tax deductions for charitable donations. They recently adopted Tax Cuts and Jobs Act amended the rules for charitable donations. Accountants need to be aware of these changes to offer the best advice to their clients.

 
 

Eligible Donations

 

Sections 170(c) and 501(c)(3) of the Internal Revenue Code define what kind of organizations are eligible for offering tax deductions on charitable donations. They are commonly referred to as charitable organizations by the IRS.

 

Accountants have to make sure that their clients always ask for a written receipt for all donations, otherwise potential tax deductions will be lost.

 
 

Amount of Deductions

 

Taxpayers can generally deduct up to 50% of their adjusted gross income from their taxes, provided they file an itemized list of charitable donations in the form of money or property. Section 11023 of the Tax Cuts and Jobs Act temporarily raised that cap to 60%.

 

If your client donates property, its fair market value can be deducted from their taxes.

 

However, some organizations are only eligible to offer 20 to 30% deductions. Accountants can check the deductibility code database to make sure which category their clients’ donation falls into.

 

If your client donates property, its fair market value can be deducted from their taxes.

 
 

Tips and Tricks

 

Bunching

Unfortunately, the Tax Cuts and Jobs Act temporarily increased the standard deduction from $6,350 to $12,000. This means that your client won’t be able to benefit from their itemized donations unless they reach the threshold.

 

Accountants can advise their clients to group their donations together on a biannual basis (a strategy called bunching).

 

To prevent this, accountants can advise their clients to group their donations together on a biannual basis (a strategy called bunching). For example, instead of donating 6,000 a year, your client can donate $12,000 every two years. Then they can take the standard deduction one year and itemize their deductions the next.

 

Uncommon Types of Donations

Accountants can also suggest less common charitable donations to their clients. For example, donating stocks can help your client save money on capital gains, since these donations are exempt from capital gains tax.

 

Another innovative way of donating is to give away a fully paid life insurance. The amount is tax deductible, and the receiver can access the funds at once.

 

There are countless ways your clients can shave their costs and hold on to their savings.

 

Donating artwork to a museum, however, is more complicated tax-wise. If the recipient sells the art within a few years, the original donor receives significantly lower tax deductions.

 

Clients over the age of 70.5 may consider shifting funds of up to $100k from their individual retirement account (IRA) to eligible charities, as this can count toward their minimum distribution requirements.

 

Accountants know that saving money doesn’t stop with tax deductions. There are countless ways your clients can shave their costs and hold on to their savings.

 

One of these is global transfers.

 

Veem allows businesses to send and receive global payments with just a click. Real-time tracking is provided for all transactions, and competitive foreign exchange rates, along with $0 wire fees, help your clients to save a significant amount of money.


7-05

 

Sign up for a free Veem account and enjoy efficient global transfers.