Every Nonprofit's Tax Guide by Stephen Fishman

Every Nonprofit's Tax Guide by Stephen Fishman

Author:Stephen Fishman [Stephen Fishman, J.D.]
Language: eng
Format: epub
ISBN: 978-1-4133-1930-9
Publisher: Nolo
Published: 2013-03-14T16:00:00+00:00


When Is a Contribution Made for Tax Purposes?

A charitable contribution is deductible only when it is completed—that is, when the money or property is delivered to the nonprofit. Thus, the mere act of making a pledge to donate cash or property in the future does not constitute a deductible contribution—the donor must actually deliver the money or property to the nonprofit. This is why the heaviest month of the year for charitable contributions is December—taxpayers must make their contributions by the end of the year to deduct them for that year. It is also why nonprofits ramp up their fundraising efforts late in the year. So, if you’re thinking about what time of year your nonprofit should devote the most resources to fundraising, the last quarter of the year is usually best.

Many donors wait until the very last minute to make their year-end contributions. Most are unaware that exactly when their contributions are considered delivered to your nonprofit for tax purposes depends on the type of contribution. Thus, it may be necessary for your nonprofit to give them some guidance. Here are some of the rules on delivery that you should be familiar with in case donors have questions.

Checks. A check is considered delivered on the date it is mailed. However, a postdated check is delivered as of the date listed on the check, regardless of when it’s mailed. For example, a check mailed on December 31, 2014, but postdated to January 2, 2015, is considered delivered on January 2.

Credit card payments. Contributions charged on a donor’s bank credit card are delivered on the date the card is charged by the bank or credit card company. Credit cards are a great way to donate cash because the donation is deductible in full in the year it is made even if the amount donated is not paid back to the credit card company until a later year. Thus, the donor doesn’t have to actually lay out any cash to get a deduction for the current year. This rule applies to any contribution made with borrowed funds.

EXAMPLE: Pete wants to make a $1,000 donation to Greenpeace by December 31, 2014 so he can deduct it from his taxes for the year. Unfortunately, Pete only has $500 in cash in the bank. Luckily, he has a credit card. He uses his credit card to make a $1,000 donation to Greenpeace on December 30, 2014. He can deduct his contribution for 2014 even though he won’t be billed for the amount by his credit card company, or pay any part of it, until 2015.

Stock and other securities. When transferred electronically, a gift of stock is complete when it arrives in the nonprofit’s brokerage account. When stock certificates are mailed, the gift is complete when it is postmarked. When certificates are hand delivered, the gift is complete when they are physically received by the nonprofit.

Real property and tangible personal property. Delivery of tangible personal property such as clothing, appliances, art, or collectibles, usually requires an actual transfer of possession of the property to your nonprofit.



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