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Deduct Your End of Year Gifts

Many nonprofit supporters make gifts in December. These gifts often may be larger and are an excellent way to benefit a nonprofit. It is important to understand how to make a gift of cash or property and qualify for a deduction this year.

The basic rule is that a gift to a nonprofit is deductible when the property or cash is delivered to a charity. The delivery rules are dependent on the type of property gifted and the timing of the transfer. The delivery is usually complete when the nonprofit receives the property.

There are several rules, however, that apply to gifts of cash, checks or property.

1. Gift of Cash — Cash is deductible when it is transferred to the nonprofit. A gift of cash is different from making a pledge or signing a note to make a gift in the future. With a pledge or note, there is no deduction until there is an actual transfer of cash to charity.

2. Gift by Check — Checks are usually deductible when placed in the mail, even though the final transfers occur when the checks clear the banking institution. For example, if you use the U.S. Mail to send a check by December 31, the gift is completed on the date of the postmark. As long as the check clears the bank, your deduction is honored this tax year.

3. Gift by Credit Card — Credit cards are deductible when the charges are made on the account. Because credit card charges are typically created immediately, the credit card gift is deductible this year. If a gift is made by credit card on December 31 this year and the bill is paid in January, the deduction can be taken for this year. Your credit card statements will show the name of the charity and the transaction date.

4. Gift of Stock — Stock may be transferred by hand delivery, electronic delivery or mail. A stock certificate may be endorsed and hand delivered. The delivery date is the date the representative for the charity receives the stock certificate. You may also obtain a stock power and mail the certificates in one envelope and the witnessed stock power in a second envelope. If U.S. Mail is used for the transfer, the transfer is effective on the date mailed. Stock may be held in a "street account" with your financial services firm. In this case, the nonprofit may create a new account with the same firm and the transfer can occur rapidly by moving stock from your account to the charity account. Be sure to save the financial service institution’s written acknowledgment that the transfer has been accomplished to document the transfer.

5. Gift of a Mutual Fund – Your shares or units in a mutual funds may be transferred to the charity by your custodian. Mutual fund gifts should be planned in advance, because there may be a delay before the actual transfer takes place.

6. Gift of Real Estate — Legal title to real estate passes when you deliver a signed and notarized deed to the nonprofit. However, it is best to have the deed recorded with the county registrar of deeds before December 31.

7. Gifts of Art — The delivery date for a gift of art is the date the nonprofit receives actual possession of the work of art. Title must also be transferred to the charity on that date. A charity must obtain actual physical possession of a gift of art. Special rules apply to a gift of a fractional interest in an artwork.

The nonprofit you make a charitable contribution to will also provide you with a written receipt. This receipt will include the name and address of the nonprofit organization, the date of the contribution, a general description of the property and will state if any goods or services were received.

Published December 8, 2023
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