Property, as well as money, can be donated to a charity. You can generally take a deduction for the fair market value of the property; however, for certain property, the deduction is limited to your cost basis. While you can also donate your services to charity, you may not deduct the value of these services. You may also be able to deduct charity-related travel expenses and some out-of-pocket expenses, however.

Keep in mind that a written record of your charitable contributions–including travel expenses such as mileage–is required in order to qualify for a deduction. A donor may not claim a deduction for any contribution of cash, a check or other monetary gift unless the donor maintains a record of the contribution in the form of either a bank record (such as a cancelled check) or written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution. For more information about this topic, see Charitable Contributions of Property below.

Tip: Contributions of appreciated property (i.e. stock) provide an additional benefit because you avoid paying capital gains on any profit. Contact the BASC tax preparation Gilbert office for additional questions.

Year-End Giving To Reduce Your Potential Estate Tax

The federal gift and estate tax exemption, which is currently set at $5.49 million, is set to increase to $5.60 million in 2018. ATRA set the maximum estate tax rate set at 40 percent.

Gift Tax. For many, sound estate planning begins with lifetime gifts to family members. In other words, gifts that reduce the donor’s assets subject to future estate tax. Such gifts are often made at year-end, during the holiday season, in ways that qualify for exemption from federal gift tax.

Gifts to a donee are exempt from the gift tax for amounts up to $14,000 a year per donee in 2017. Next year, in 2018, the gift tax exclusion increases to $15,000, however.

Caution: An unused annual exemption doesn’t carry over to later years. To make use of the exemption for 2017, you must make your gift by December 31.

Husband-wife joint gifts to any third person are exempt from gift tax for amounts up to $28,000 ($14,000 each). Though what’s given may come from either you or your spouse or both of you, both of you must consent to such “split gifts.”

Gifts of “future interests,” assets that the donee can only enjoy at some future time such as certain gifts in trust, generally don’t qualify for exemption; however, gifts for the benefit of a minor child can be made to qualify.

Tip: If you’re considering adopting a plan of lifetime giving to reduce future estate tax, don’t hesitate to call the office  tax preparation Gilbert for assistance.

Cash or publicly traded securities raise the fewest problems. You may choose to give property you expect to increase substantially in value later. Shifting future appreciation to your heirs keeps that value out of your estate. But this can trigger IRS questions about the gift’s true value when given.

You may choose to give property that has already appreciated. The idea here is that the donee, not you, will realize and pay income tax on future earnings and built-in gain on sale.

Gift tax returns for 2017 are due the same date as your income tax return. Returns are required for gifts over $14,000 (including husband-wife split gifts totaling more than $14,000) and gifts of future interests. Though you are not required to file if your gifts do not exceed $14,000, you might consider filing anyway as a tactical move to block a future IRS challenge about gifts not “adequately disclosed.” Please call the office tax preparation Gilbert if you’re considering making a gift of property whose value isn’t unquestionably less than $14,000.

Income earned on investments you give to children or other family members are generally taxed to them, not to you. In the case of dividends paid on stock given to your children, they may qualify for the reduced child tax rate, generally 10 percent, where the first $1,050 in investment income is exempt from tax and the next $1,050 is subject to a child’s tax rate of 10 percent (0 percent tax rate on long-term capital gains and qualified dividends).

Caution: In 2017, investment income for a child (under age 18 at the end of the tax year or a full-time student under age 24) that is in excess of $2,100 is taxed at the parent’s tax rate.