Avoid Charitable Contribution Mistakes!

Avoid Charitable Contribution Mistakes!


There are basic donation rules that must be followed when contributing to your favorite charity, but it’s easy for anyone to make a mistake.  Here are just a few common mistakes that many American taxpayers make:

Overvaluing Gifts:  This is probably the easiest mistake to make since we tend to place sentimental value on personal belongings.  Well, the IRS doesn’t share your emotional attachment and can hit you with penalties if you overvalue your donations.  You may even need to obtain a professional appraisal for certain items.  See IRS Publication 561 for detailed information.

Insufficient Documentation:  It cannot be said enough…DOCUMENT, DOCUMENT, DOCUMENT! You must be able to substantiate certain gifts and keep accurate records such as receipts, written disclosures, bank statements and a contemporaneous written acknowledgement (if required).

Donations of Corporate Stock:  Be careful about donating appreciated stock you have owned less than 1 year – for tax deduction purposes the appreciation will be deemed a short-term gain, so you will typically only be able to deduct your cost basis, not the fair market value.  Also, if it’s a poorly performing stock, you may want to sell first and give your charity cash (ask your CPA about doing an itemized deduction and taking a capital loss when you sell).

Overlooked QCDs:  Do you have an IRA but won’t need your required minimum distribution this year?  One way to reduce your taxable income is to make a qualified charitable distribution (QCD).  The IRS allows you to directly contribute up to $100,000 from your IRA to a qualified charity.

Always consult with your personal tax professional to make sure you haven’t missed anything, see what opportunities are available to you and maximize your tax deductions.

Source: www.irs.gov, Publication 526


More Updates


For trusts that inherited an IRA in 2019, an important deadline is approaching. The due date to provide required trust documentation to the IRA custodian to ensure that the longest payout period possible is available for the inherited IRA is October 31, 2020. Generally, only individuals who are named on an IRA beneficiary form can

Read More »


The coronavirus-related distribution (CRD) rules for Roth conversions have a gaping hole. An “affected person” (as we have defined in previous blogs), is entitled under the CARES Act to withdraw up to $100,000 from their IRA or workplace retirement plan. A CRD avoids the 10% early distribution penalty for those under 59 1/2, can be

Read More »

Rolling Over an RMD

Like most people’s lives, the retirement world is upside down. This is made evident by a single statement: “Required minimum distributions (RMDs) can be rolled over.” Yes, that is the new normal—at least for this year. RMDs are considered the first money out of an IRA and workplace plan. Typically, these dollars are ineligible to

Read More »
Scroll to Top