How to give money without getting a tax headache: Part 2

by Mandy Hicks

By Nathan Vinson, Attorney
English, Lucas, Priest and Owsley, LLP

You’d think giving money away would be easy, wouldn’t you? And for the most part, it is. But it’s important to pay attention to some of the details so you don’t end up getting socked with a tax bill or missing out on a tax deduction in return for your generosity.

In our last post, we discussed how to give money to your children, grandchildren or anyone else you’d like without much complication (such as having to file a gift tax return).  Now, let’s turn to gifting that can net you a tax deduction on your income tax return (in addition to just making you feel good).

Giving to non-profits usually nets you a tax break, which is what motivates a lot of people to give prior to the end of a calendar year. If you give a very large donation, follow-up questions by the IRS are not uncommon. Large donations can be a trigger for more questions, so keep your records.

Here are a few other things you need to know about charitable giving – particularly in a year in which many people made political donations.

For the most part, only donations made to 501c(3) corporations are tax deductible. Organizations that lobby Congress can’t receive the 501c(3) designation, but those organizations sometimes have an associated Foundation.

We’ll give you two examples. The American Civil Liberties Union can receive your donation, but it’s not tax deductible. The ACLU is a 501c(4), which means it has the ability to lobby Congress. If you want to support the mission of the ACLU with a tax-deductible donation, you can give to their associated Foundation instead, which is a 501c(3). On the conservative side, donations to The Heritage Foundation are tax-deductible, but donations to its sister organization, Heritage Action for America, are not. Heritage Action for America lobbies Congress.

So, in summary, you can give to organizations that lobby, no problem. But don’t expect to take it off as a deduction on your taxes.

Donations made directly to a political candidate aren’t tax deductible. Don’t try it. Read more here if you really want the full explanation (Wall Street Journal subscription required). Oddly enough, four states – Ohio, Arkansas, Virginia and Oregon – give small state tax credits for donating to some political campaigns. If you’re curious, you can read about that here.

Donations from your IRA are tax-free, up to $100,000, if you’re age 70 ½ or older. This has been a great change for those who are ready to make a difference in the world now rather than leave the money in their estate for a non-profit. It’s a good way to see the impact of your gift come to life. If you’re giving a six-figure donation, chances are, the non-profit would welcome your input about what you’d like to see happen with the funds.

To claim your donation on your 2016 taxes, you’ll need your gift to make it to the intended organization or be postmarked by December 31, 2016. This is pretty obvious, but a non-flexible deadline that we’d be remiss not to mention.

If you need tax advice, please contact me. I’m happy to help. Get those donations and gifts in order by year’s end to ensure you’re happy with how things turn out during tax prep in April. You can reach me, attorney Nathan Vinson, at (270) 781-6500 or

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