- If you're rushing to get your charitable donations done before Dec. 31, there are some key tips you need to keep in mind to make sure your gift counts for this tax year.
- Pay attention to whether you are giving to charitable organizations or to friends and family and how you are giving the money — in cash, securities or actual property.
If giving to charity is still on your agenda for 2018, there's still a window of time for you to make that year-end donation.
However, if you make a mistake, your gift might not count for the 2018 tax year.
Of note, new tax rules have made it more difficult to get a deduction for your donations. That is because the standard deduction is so much higher — about $12,000 for individuals and $24,000 for married couples who file jointly.
And your donations (plus any other deductions such as mortgage interest, etc.) must push you over the standard deduction in order for you to itemize on your tax return.
A congressional report earlier this year estimated that just 18 million households would itemize this year, down from 46.5 million in 2017.
If you're one of them, you need to get started now.
"We're running out of time, so you need to do it earlier rather than later," said Michael Duffy, director of the Strategic Wealth Advisory Group at Merrill Lynch Private Banking and Investment Group.
There are rules you need to pay attention to, such as whether you're giving to charity or to friends and family, and how you're giving, such as cash, securities or tangible property.
When giving to charity, make sure that the organization is a U.S.-based 501(c)(3) organization.
If you plan to send your donation via check in the mail, send it early enough so that it is postmarked on or before Dec. 31. Also note that the mailbox rule only applies to U.S. mail, Duffy said, not to other delivery methods such as FedEx.
If pay for your donation by credit card, the transaction is official once the charge is made, not when you pay the bill.
If you choose to give physical assets, such as art work, the delivery and transfer of the title or deed must happen before Dec. 31.
If you choose to donate stock, that transaction is only recognized as completed once the transfer request has been submitted by your financial advisor or firm.
Keep in mind that if you are over age 70½, you can make a donation directly from an individual retirement account to a charity.
If your gift exceeds $250, you need to get a receipt. A cancelled check or a brokerage certificate showing a transfer of shares won't count.
"Charities aren't required by law to give you a receipt, so you have to go and ask them," Duffy said.
Furthermore, you have to have that receipt in hand by the time you file your taxes in April. If you file for an extension, you will need to have documentation of your gift by the time you file in October.
"Put a tickler somewhere in your personal file to follow up within 60 days to get the receipt," Duffy said.
It's not too late to set up what's known as a donor-advised fund for your charitable gifts this year.
The advantage of a donor-advised fund is you can get the deduction for making the gift this year, but decide later which charities to which you want to donate the money. Most major brokerage firms can set one up for you.
Also, many donor-advised funds typically have a minimum requirement. Firms such as Schwab and Fidelity have $5,000 minimums.
When giving to friends and family, you have the same Dec. 31 deadline for making your gift.
There is, however, one important distinction: The mailbox rule no longer applies.
So if you give money to your grandchildren, you need them to cash that check before the end of the year in order to count as a gift in 2018. Just having it postmarked by a certain date will not be good enough.
"Encourage your non-charities, if they're receiving cash or a check, to go ahead and give it to the bank before Dec. 31," Duffy said.
Also keep in mind that while you can give an unlimited amount of money to a spouse, there are limits for other friends and family members: $15,000 or less.
Gifts over $15,000 will require you to fill out a federal gift tax return.