• Are Your Charity Auction Purchases Tax Deductible?

    12 September 2015
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    Have you ever won an item at a charity auction? You may be wondering whether the money you spent on the items purchased constitutes a charitable donation, and we’re happy to answer this tricky charity tax question for you.

    The answer to that question is some, but not all, of what’s paid for the item may be deductible. So if you purchase items at a charity auction, you may claim a charitable contribution deduction for the excess of the purchase price paid for the item over its fair market value you must be able to show, however, that you knew that the value of the item was less than the amount you paid for it.  For example, a charity may publish a catalog, given to each person who attends an auction, providing a good faith estimate of items that will be available for bidding.  Assuming you have no reason to doubt the accuracy of the published estimate, if you pay more than the published value, the difference between the amount you paid and the published value may constitute a charitable contribution deduction.

    In addition, if you provide goods for charities to sell at an auction/fundraiser, you may wonder if you are entitled to claim a fair market value charitable deduction for your contribution of appreciated property to the charity that will later be sold.  Under these circumstances, the law limits your charitable deduction to your tax basis in the contributed property and does not permit you to claim a fair market value charitable deduction for the contribution.  Specifically, the Treasury Regulations (Sec 170) provide that if a donor contributes tangible personal property to a charity that is put to an unrelated use, the donor’s contribution is limited to the donor’s tax basis in the contributed property.  The term unrelated use means a use that is unrelated to the charity’s exempt purposes or function. The sale of an item is considered unrelated, even if the sale raises money for the charity to use in its programs.

    Please contact us at Dagley & Co. for additional information on charitable tax deductions.

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  • Bunch Your Deductions For Big Tax Benefits

    6 August 2015
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    Have you heard of the “bunching” strategy for tax deductions? If your tax deductions normally fall short of itemizing your deductions, or even if you are able to itemize, but only marginally, you may benefit from using the “bunching” strategy.

    The tax code allows most taxpayers to utilize the standard deduction or itemize their deductions if that provides a greater benefit.  As a rule, most taxpayers just wait until tax time to add everything up and then use the higher of the standard deduction or their itemized deductions.

    If you want to be more proactive, you can time the payments of tax-deductible items to maximize your itemized deductions in one year and take the standard deduction in the next.

    For the most part, itemized deductions include medical expenses, property taxes, state and local income (or sales) taxes, home mortgage and investment interest, charitable deductions, unreimbursed job-related expenses, and casualty losses.  The “bunching strategy” is more commonly associated with medical expenses, tax payments and charitable deductions, although there are circumstances in which the other deductions might come into play.  There are many opportunities to bunch deductions, and the following are examples of the bunching strategies most commonly used:

    • Medical Expenses – You contract with a dentist for your child’s braces. The dentist may offer you an up-front, lump sum payment or a payment plan.  By making the lump sum payment, the entire cost is credited in the year paid, thereby dramatically increasing your medical expenses for that year.  If you do not have the cash available for the up-front payment, then you can pay by credit card, which is treated as a lump-sum payment for tax purposes.  If you use a credit card, you must realize that the credit card interest is not deductible, and you need to determine if incurring the interest is worth the increased tax deduction.  Another important issue with medical deductions is that only the amount of the total medical expenses that exceeds 10% of your adjusted gross income (AGI) is actually deductible. If you are 65 or over the medical deduction floor is 7.5% through 2016, unless you are caught by the Alternative Minimum Tax (AMT). Then only the amount that exceeds 10% of your AGI is actually deductible.  So, there is no tax benefit in bunching medical deductions unless the expenses exceed these limitations.

    If the current year is an abnormally high-income year, you may, where possible, wish to put off making medical expense payments until the subsequent year when the 10% (7.5% threshold is less.

    • Taxes – Property taxes on real estate are generally billed annually at mid-year, and most locales allow the tax bill to be paid in semi-annual or quarterly installments.  Thus, you have the option of paying it all at once or paying in installments.  This provides the opportunity to bunch the tax payments by paying one semi-annual installment or two quarterly installments and a full year’s tax liability in one year and only paying one semi-annual installment or two quarterly installments in the other year.  In doing so, you are able to deduct 1-½ year’s taxes in one year and 50% of a year’s taxes in the other. If you are thinking of making the property tax payments late as a way to accomplish bunching, you should be cautious.  The late payment penalty will probably wipe out any potential tax savings.

    If you reside in a state that has state income tax, the state income tax paid or withheld during the year is deductible as a federal itemized deduction.  So, for instance, if you are paying state estimated tax in quarterly installments, the fourth-quarter estimate is generally due in January of the subsequent year.  This gives you the opportunity to either make that payment before December 31st, and be able to deduct the payment on the current year’s return, or pay it in January before the January due date and use it as a deduction in the subsequent year.

    A word of caution about the itemized deduction for taxes!  Taxes are only deductible for regular tax purposes.  So, to the extent you are taxed by the AMT, you derive no benefits from the itemized deduction for taxes.

    • Charitable Contributions – Charitable contributions are a nice fit for “bunching” because they are entirely payable at the taxpayer’s discretion.  For example, if you normally tithe at your church, you could make your normal contributions during the year and then prepay the entire subsequent year’s tithing in a lump sum in December of the current year, thereby doubling up on the church contribution one year and having no charity deduction for church in the other year.  Normally, charities are very active with their solicitations during the holiday season, giving you the opportunity to make the contributions at the end of the current year or simply wait a short time and make them after the end of the year. Be sure you get a receipt or acknowledgment letter from the organization that clearly shows in which year the contribution was made.

    If you think a “bunching” strategy might benefit you, please call this office to discuss the issue and set up an appointment for some in-depth strategizing with Dagley & Co. You’ll find our information at the bottom of this webpage.

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  • Tax Tips For Sending Employees on Business Trips

    20 July 2015
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    business travel taxes

    Do you often send your employees abroad – or even a state or two over? Sending employees on business trips is essential for many companies – even though travel can result in tax headaches for both the employer and the employee if the tax regulations are not adhered to. If the rules are followed, the cost of the employee’s travel will be fully deductible to the employer, with the exception of meals, which are only 50% deductible, and tax-free reimbursement to the employee. In addition, the reimbursement is not subject to FICA or payroll withholding.

    With that said, if the rules aren’t followed, the expenses are still deductible by the employer, but the reimbursement must be added to the employee’s taxable wages, subject to both FICA and payroll withholding.

    An employer is able to deduct ordinary and necessary business expenses, including an employee’s job-related travel and lodging expenses that are not lavish or extravagant, and under the rules of working condition fringe benefits, any such item that is deductible by the employer is not includible in the employee’s salary. In addition, an advance or reimbursement made to an employee under an “accountable plan,” which requires the employee to adequately account for the expenses and return any excess advances, is deductible by the employer and not subject to FICA or income tax withholding.

    Reimbursements not made under an accountable plan are fully taxable to the employee, and the only way for the employee to deduct the expenses is as a miscellaneous itemized deduction on his or her 1040. To do that, the employee must itemize his or her deductions on Schedule A, as opposed to taking the standard deduction. The employee business expense category on Schedule A is subject to a 2% of AGI nondeductible threshold, and this frequently results in the employee not being able to deduct any or only a portion of the expenses.

    With the exception noted below, to deduct the cost of lodging and meals, the taxpayer must be away from home overnight. Any trip that is of such a length as to require sleep or rest to enable the taxpayer to continue working is considered “overnight.”

    Under an exception to the away-from-home rule, the cost of local lodging is deductible if the lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function and the duration does not exceed five calendar days and does not recur more frequently than once per calendar quarter. For an employee, the employer must require the employee to remain at the activity or function overnight, the lodging must not be lavish or extravagant, and there can be no significant element of personal pleasure, recreation, or benefit.

    A taxpayer’s home, for purposes of determining if he or she is away from home and can deduct lodging and meals, is generally where the taxpayer normally lives and works, although that fact is sometimes difficult to determine, in which case the IRS has numerous special rules that apply.

    Where an away-from-home assignment, at a single location, lasts for one year or less, it is “temporary,” and the travel expenses are deductible. If the assignment is longer, there is a good chance the expenses will not be deductible based upon some complex rules.

    The rules for the tax treatment of travel expenses and temporary away-from-home assignments can be complex. Please give us at Dagley & Co. a call or drop us an email for further details or assistance. You’ll find our information at the bottom of this webpage.

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  • The Tax Filing Deadline Is Rapidly Approaching!

    19 March 2015
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    Where did the time go? Those who have not yet filed their 2014 tax return need to keep in mind that April 15, 2015 is the due date to either file your return and pay any taxes owed, or file for the automatic six-month extension and pay the tax you estimate to be due.

    In addition, the April 15, 2015 deadline also applies to the following:

    • Tax year 2014 balance-due payments – Taxpayers that are filing extensions are cautioned that the filing extension is an extension to file, NOT an extension to pay a balance due.  Late payment penalties and interest will be assessed on any balance due, even for returns on extension.  Taxpayers anticipating a balance due will need to estimate this amount and include their payment with the extension request.
    • Tax year 2014 contributions to a Roth or traditional IRA – April 15 is the last day contributions for 2014 can be made to either a Roth or traditional IRA, even if an extension is filed.
    • Individual estimated tax payments for the first quarter of 2015 – Taxpayers, especially those who have filed for an extension, are cautioned that the first installment of the 2015 estimated taxes are due on April 15.  If you are on extension and anticipate a refund, all or a portion of the refund can be allocated to this quarter’s payment on the final return when it is filed at a later date. If the refund won’t be enough to fully cover the April 15 installment, you may need to make a payment with the April 15 voucher. Please call this office for any questions.
    • Individual refund claims for tax year 2011 – The regular three-year statute of limitations expires on April 15 for the 2011 tax return.  Thus, no refund will be granted for a 2011 original or amended return that is filed after April 15. Caution: The statute does not apply to balances due for unfiled 2011 returns.

    If this office is holding up the completion of your returns because of missing information, please forward that information as quickly as possible in order to meet the April 15 deadline.  Keep in mind that the last week of tax season is very hectic, and your returns may not be completed if you wait until the last minute.  If it is apparent that the information will not be available in time for the April 15 deadline, then let the office know right away so that an extension request, and 2015 estimated tax vouchers if needed, may be prepared.

    If your returns have not yet been completed, please get in touch with us at Dagley & Co. rigt away so that we can schedule an appointment and/or file an extension if necessary.

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  • March 2015 Tax Due Dates for Businesses and Business Owners

    26 February 2015
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    March 2015

    You may have April 15th on your mind, but there are some crucial due dates in March that may require your attention as a business owner. Be sure to get in touch with Dagley & Co. if you need help with any of the items listed here.

    March 2 – Payers of Gambling Winnings

    File Form 1096, Annual Summary and Transmittal of U.S. Information Returns, along with Copy A of all the Forms W-2G you issued for 2014. If you file Forms W-2G electronically, your due date for filing them with the IRS will be extended to March 31. The due date for giving the recipient these forms was February 2.

    March 2 –  Informational Returns Filing Due

    File information returns (Form 1099) and transmittal Forms 1096 for certain payments you made during 2014. There are different forms for different types of payments. These are government filing copies for the 1099s issued to service providers and others.

    March 2 – 2 All Employers

    File Form W-3, Transmittal of Wage and Tax Statements, along with Copy A of all the Forms W-2 you issued for 2014. If you file Forms W-2 electronically, your due date for filing them with the SSA will be extended to March 31. The due date for giving the recipient these forms was February 2.

    March 2 – Large Food and Beverage Establishment Employers

    File Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. Use Form 8027-T, Transmittal of Employer’s Annual Information Return of Tip Income and Allocated Tips, to summarize and transmit Forms 8027 if you have more than one establishment. If you file Forms 8027 electronically, your due date for filing them with the IRS will be extended to March 31.

    March 16 –  S-Corporation Election

    File Form 2553, Election by a Small Business Corporation, to choose to be treated as an S corporation beginning with calendar year 2015. If Form 2553 is filed late, S treatment will begin with calendar year 2016.

    March 16 –  Electing Large Partnerships

    Provide each partner with a copy of Schedule K-1 (Form 1065-B), Partner’s Share of Income (Loss) From an Electing Large Partnership, or a substitute Schedule K-1. This due date applies even if the partnership requests an extension of time to file the Form 1065-B by filing Form 7004.

    March 16 – Social Security, Medicare and Withheld Income Tax

    If the monthly deposit rule applies, deposit the tax for payments in February.

    March 16 – Non-Payroll Withholding

    If the monthly deposit rule applies, deposit the tax for payments in February.

    March 16 – Corporations

    File a 2014 calendar year income tax return (Form 1120 or 1120-A) and pay any tax due. If you need an automatic 6-month extension of time to file the return, file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, and deposit what you estimate you owe. Filing this extension protects you from late filing penalties but not late payment penalties, so it is important that you estimate your liability and deposit it using the instructions on Form 7004.
    March 31 – Electronic Filing of Forms 1098, 1099 and W-2G

    If you file forms 1098, 1099, or W-2G electronically with the IRS, this is the final due date. This due date applies only if you file electronically (not paper forms). Otherwise, March 2 was the due date. The due date for giving the recipient these forms was February 2.

    March 31 – Electronic Filing of Forms W-2
    If you file forms W-2 for 2014 electronically with the IRS, this is the final due date. This due date applies only if you electronically file. Otherwise, the due date was March 2. The due date for giving the recipient these forms was February 2.

    March 31 – Large Food and Beverage Establishment Employers 

    If you file forms 8027 for 2014 electronically with the IRS, this is the final due date. This due date applies only if you file electronically. Otherwise, March 2 was the due date.

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  • Only Five Days Left For 2014 Tax Deductions

    26 December 2014
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    Happy New Year

    Five days is enough time to take last minute steps for 2014 tax deductions before the new year. Public domain image.

    Now that the holidays are wrapping up, it’s time to wrap up your year before it’s too late. The last day you may make a tax deductible purchase, pay a tax deductible expense, or make tax deductible charitable contributions for 2014 is Wednesday, Dec. 31.

    That’s only five days away!

    The good news is: five days is enough time to make charitable contributions, pay deductible taxes, and make business acquisitions before year-end. If you are making last minute purchases of business equipment, you also must place that equipment into service before year’s end. Thus do not expect a deduction on your 2014 return if you take delivery after the end of the year, even if you paid for the item in 2014.

    A charitable contribution to a qualified organization is considered made at the time of its unconditional delivery, which, for donations made by check, is the date you mail it. If you use a pay-by-phone account, the date the financial institution pays the amount is considered the date you made the contribution.

    If you are short of cash, keep in mind that purchases or contributions charged to your credit card are deemed purchased when the charge is made.

    All of us at Dagley & Co. wish you a happy New Year and look forward to assisting you with your tax preparation needs during the coming tax season.

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  • December 2014 Individual Tax Due Dates

    2 December 2014
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    We’ve compiled a list of some of the necessary tax deadlines for individuals. Since it’s the end of the year, it’s especially important that you tie up all loose ends on time. If you are worried that you may miss these deadlines, contact us, Dagley & Co., for help. (Find our phone number at the bottom of this webpage.)

    December – Time for Year-End Tax Planning

    December is the month to take final actions that can affect your tax result for 2014. Taxpayers with substantial increases or decreases in income, changes in marital status or dependent status, and those who sold property during 2014 should call for a tax planning consultation appointment. If you feel overwhelmed, consider hiring a professional like our founder, Dan Dagley, to make sure everything is done smoothly.

    December 10 – Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during November, you are required to report them to your employer on IRS Form 4070 no later than December 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

    December 31 – Last Day to Make Mandatory IRA Withdrawals

    Last day to withdraw funds from a Traditional IRA Account and avoid a penalty if you turned age 70½ before 2014. If the institution holding your IRA will not be open on December 31, you will need to arrange for withdrawal before that date.

    December 31 – Last Day to Pay Deductible Expenses for 2014

    Last day to pay deductible expenses for the 2014 return (doesn’t apply to IRA, SEP or Keogh contributions, all of which can be made after December 31, 2014). Taxpayers who are making state estimated payments may find it advantageous to prepay the January state estimated tax payment in December (Please call the office for more information).

    December 31 – Caution! Last Day of the Year

    If the actions you wish to take cannot be completed on the 31st or a single day, you should consider taking action earlier than December 31st.

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  • Giving To Charity This Season? Double Check Where It’s Going

    4 November 2014
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    ‘Tis almost the time of year for gift giving: friends, family, and of course, charitable giving. Before you write those charity checks, though, you should also be aware that there are fraudsters out there who solicit on behalf of bogus charities or who aren’t entirely honest about how a so-called charity will use your contribution.

    Solicitations for aid that you get in person, by phone or mail, by e-mail, on websites or on social networking sites may not be who they say they are. Fraudsters also pop up whenever there are natural disasters such as earthquakes, floods, etc., trying to coax you into making a donation that will go into their pockets, not to help victims of the disaster.

    Unfortunately, legitimate charities face competition from fraudsters. If you are thinking about giving to a charity with which you are not familiar, do your research to avoid swindlers who try to take advantage of your generosity.

    Here are tips to help make sure that your charitable contributions actually go to the cause you support:

    • Donate to charities you know and trust. Be alert for charities that seem to have sprung up overnight in connection with current events.
    • Ask if a caller is a paid fundraiser, who he/she works for, and what percentage of your donation goes to the charity and to the fundraiser. If you don’t get a clear answer – or if you don’t like the answer you get – consider donating to a different organization.
    • Don’t give out personal or financial information – including your credit card or bank account number – unless you know for sure that the charity is reputable.
    • Never send cash: you can’t be sure the organization will receive your donation, and you won’t have a record for tax purposes.
    • Never wire money to someone who claims to be a charity. Scammers often request donations to be wired because wiring money is like sending cash: once you send it, you can’t get it back.
    • If a donation request comes from a group claiming to help your local community (for example, local police or firefighters), ask the local agency if they have heard of the group and are getting financial support therefrom.
    • Check out the charity with the Better Business Bureau’s (BBB) Wise Giving Alliance, Charity Navigator, Charity Watch, or GuideStar.

    One of the upsides of being able to give to a cause you care about is having the ability to deduct that charitable contribution on your tax return. In order to do this, it must be a legitimate charity. Contributions to religious, charitable, scientific, educational, literary, and other institutions that are incorporated or recognized as organizations by the IRS may be deducted. Sometimes these organizations are referred to as 501(c)(3) organizations after the code section that allows them to be tax-exempt. Gifts to state and local government, the federal government, qualifying veterans and fraternal organizations, and certain nonprofit cemetery companies also may be deductible. Gifts to other kinds of nonprofits, such as business leagues, social clubs and homeowner’s associations, as well as to individuals, cannot be deducted.

    To claim a cash contribution, you must be able to document the contribution with a bank record that includes the name of the qualified organization, the date of the contribution, and the amount of the contribution or a receipt (or a letter or other written communication) from the qualified organization that shows the same information. Bank records may include a canceled check, a bank or credit union statement, or a credit card statement. In addition, to deduct a contribution of $250 or more, you must have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records.

    Be aware that, to claim a charitable contribution, you must also itemize your deductions. It may also be beneficial for you to bunch your deductions in one year and skip the next. Please contact Dagley & Co. if you have questions related to charitable giving tax benefits associated with your particular tax situation.

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  • Volunteering? There Are Tax Breaks For That!

    17 October 2014
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    We’re heading into a season of giving, and knowing all the facts just might prompt you to give more to your favorite cause. If you volunteer your time for a charity, you may qualify for some tax breaks. Although no tax deduction is allowed for the value of services performed for a charity, there are deductions permitted for out-of-pocket costs incurred while performing the services. The normal deduction limits and substantiation rules also apply. The following are some examples:

    • Away-from-home travel expenses while performing services for a charity, including out-of-pocket round-trip travel cost, taxi fares, and other costs of transportation between the airport or station and hotel, plus lodging and meals at 100%. Note that these expenses are only deductible if there is no significant element of personal pleasure associated with the travel, or if your services for a charity do not involve lobbying activities.
    • The cost of entertaining others on behalf of a charity, such as wining and dining a potential large contributor. However, the cost of your own entertainment or meal is not deductible.
    • If you use your car while performing services for a charitable organization, you may deduct your actual unreimbursed expenses directly attributable to the services, such as gas and oil costs, or you may deduct a flat 14 cents per mile for the charitable use of your car. You may also deduct parking fees and tolls.
    • Deduct the cost of the uniform you wear when doing volunteer work for the charity, as long as the uniform has no general utility. The cost of cleaning the uniform can also be deducted.

    There are some misconceptions as to what constitutes a charitable deduction and the following are frequently encountered issues:

    • No deduction is allowed for the depreciation of a capital asset as a charitable deduction. This includes vehicles, computers, etc.

    Example: Larua volunteers as a member of the sheriff’s mounted search and rescue team. As part of volunteering, Laura is required to provide a horse. Laura is not allowed to deduct the cost of purchasing or to depreciate her horse. She can, however, deduct uniforms, travel, and other out-of-pocket expenses associated with the volunteer work.

    However, a taxpayer may deduct the cost of maintaining a personally owned asset to the extent its use relates to providing services for a charity. Thus, for example, a taxpayer was allowed to deduct the fuel, maintenance and repair costs (but not depreciation or the fair rental value) of piloting his plane in connection with volunteer activities for the Civil Air Patrol. Similarly, a taxpayer, such as Lauren in our example, who participated in a mounted posse that was a civilian reserve unit of the county sheriff’s office, could deduct the cost of maintaining a horse (shoeing and stabling).

    • A taxpayer who buys an asset and uses it while performing volunteer services for a charity can’t deduct its cost if he retains ownership of it. That’s true even if the asset is used exclusively for charitable purposes.

    No charitable deduction is allowed for a contribution of $250 or more unless you substantiate the contribution with a written acknowledgment from the charitable organization. To verify your contribution:

    • Get written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid. For example, if you travel out of town as a volunteer, request a letter from the charity explaining why you’re needed at the out-of-town location.
    • You should submit a statement of expenses if you are paying out of pocket for substantial amounts and, preferably, a copy of the receipts to the charity, then arrange for the charity to acknowledge the amount of the contribution in writing.
    • Maintain detailed records of your out-of-pocket expenses—receipts plus a written record of the time, place, amount, and charitable purpose of the expense.

    For additional details related to expenses incurred as a charity volunteer, please contact Dagley & Co.

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  • Charity Purchases and Auctions – Do You Get A Bigger Deduction Participating Online?

    19 September 2014
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    Americans are the most generous people in the world. According to Charity Navigator, “during 2013, total giving was more than $335 billion.”

    The internet is changing the landscape of most everything we do. The majority of Dagley & Co. clients come to us online and work with us remotely. That’s how, with an office in Washington, D.C., we have clients from all over the country and on four continents. The same is true for charity auctions. One of the premier online services for charity auctions is BiddingForGood. According to their website, they have raised over $248 million for non-profits and schools as of this writing.

    One thing that does not change – whether you attend one the various philanthropy events in Washington, D.C., in your city, or participate online – is the tax deductibility and documentation requirements.

    When a charity sells or auctions of property or services at a price in excess of value these are referred to as “quid pro quo” contributions or dual payments made that consist partly of a charitable gift and partly of consideration for goods or services provided to the donor.

    Quid pro quo in Latin is “something for something.” When used in the context of charitable contributions, quid pro quo contributions typically include the purchase of tickets for sightseeing tours, all-expense-paid trips, theatrical or concert performances, books or subscriptions to magazines, stationery, candy, and more. They are sold with a generous mark-up that is designed to help the charity in performing its functions. In these cases, the charitable deduction is the excess of the payment over the value received by the purchaser-contributor. For instance, when tickets to a show are purchased from a charity at a price in excess of the normal admission charge, the excess over the latter (plus tax) is a charitable contribution.

    Determining and documenting the amount of the purchase that represents the charitable portion is the key to being able to take a charitable tax deduction for quid pro quo purchases. Tax law requires charitable organizations that receive a quid pro quo contribution in excess of $75 to provide a written statement, in connection with soliciting or receiving the contribution, that informs the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the amount of the purchase that is in excess of the value of the property or service purchased and a good-faith estimate of the value of the goods or services purchased.

    How much should you get written off your taxes in exchange for an online or in-person donation? 

    • Example #1A taxpayer purchases a cookbook from a charity for $100. The charity provides the taxpayer with a good faith estimate of $20 for the value of the book in a written disclosure statement. Thus, the taxpayer’s charitable deduction is $80 ($100 minus the $20 value of the book).
    • Example #2A taxpayer attends a charity auction. The charity provides a catalog of the items for auction and a good-faith estimate of the value of each item. The taxpayer is the successful bidder for a vase valued at $100 in the catalog, for which the taxpayer bid and paid $500. The taxpayer’s charitable deduction is $400 ($500 minus the good-faith valuation of $100).
    • Example #3A taxpayer pays $40 to see a special showing of a movie for the benefit of a qualified charity. The ticket reads “Contribution $40.” If the regular price for the movie is $10, the contribution would be $30 ($40 minus the regular $10 ticket price).

    In short, the value of your donation and its good-faith estimate has an affect on your deduction, not your online vs. in-person participation. So don’t forget to keep good records and the required documentation when you give to your favorite charity and causes close to your heart and provide them to Dagley & Co. so that we can maximize your deductions and minimize your taxes. And if you can’t make it to your favorite charity auction and participate this year, consider going online so that you too can make a difference and still get the tax deduction.

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