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Charitable Contributions To Reduce U.S. Tax Liability

November 29, 2013

U.S. taxpayers can reduce their tax burdens through charitable contributions. As the year-end approaches, our team of AG Tax professionals has prepared a brief summary on types of charitable contributions that are accepted by the U.S. Internal Revenue Service (IRS), as well as additional information that can help you minimize your taxes through charitable contributions.

Types of Charitable Contributions

• Clothing and household items, (such as furniture, furnishings, and electronics), donated to charity must be in good used condition or better. Non-cash contributions above $500 are not required to meet this standard if the taxpayer includes a qualified appraisal of the item when submitting the return.

•To deduct any charitable donation of money, taxpayers are required to have a bank record or proof of written communication from the charity. The bank record or proof of written communication from the charity must clearly state the name of the charity, as well as the date and amount of the contribution. Note: Donations of money include donations made in cash, cheque, electronic funds transfer, credit card transfer, and donations through payroll deduction.

•The favourable tax provision for direct charitable contributions from individual retirement accounts (IRAs) will expire at the end of this year and will not be available for distributions occurring in tax years beginning after December 31, 2013. Taxpayers, (who are 70 ½ years of age or older), should consult a tax professional to take advantage of the annual exclusion of up to $100,000 from gross income for qualified charitable distributions made from usually taxable traditional IRA distributions. To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity.

•A charitable contribution of real property is generally effective when the donor executes a deed to the property in accordance with local law, delivers it to the charity, and the deed is recorded.

•If a taxpayer owns property which he/she expects will continue to increase in value, (and, as such, he/she wants to continue to hold the property in order to benefit from the additional value appreciation), the taxpayer should use cash (which otherwise would have been contributed towards charity) to buy a similar property and contribute the earlier property for charity. This will result in a tax deduction equal to the entire fair market value of the property contributed, and the new property acquired at a higher cost, thus reducing the amount of gain the taxpayer will recognize when the property is sold.

•In making any sizeable charitable contributions, taxpayers should make contributions in appreciated capital gain property that result in long-term capital gain if sold. This way, a deduction generally is obtained for the full value of the property (for example, shares of stock).

•Contributions of appreciated capital gain property are generally subject to a 30% of Adjusted Gross Income ceiling, instead of the usual 50% ceiling, unless a special election is made to reduce the deductible amount of the contribution.

Additional Information:

•The timing of all charitable contributions should be planned, so that taxpayers can obtain maximum benefits.

•Donations made to qualified/eligible (as per IRS regulations) organizations are tax-deductible.

•Only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions.

•Non-cash contributions over $500 have additional tax reporting requirements.

•Properly planned charitable contributions can significantly impact taxes for high net-worth individuals.

It is highly advisable that all taxpayers consult with tax professionals regarding the steps to take in order to minimize taxes.

AG Tax LLP Can Help

If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of U.S. and Canadian tax laws as well as cross-border compliance

Furthermore, as a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.

We can assist with:

  • Canadian Personal and corporate tax returns
  • Cross Border Taxation and Business Planning
  • U.S. Personal and Corporate Taxation
  • Disclosure of Foreign Assets and other information filings
  • Retirement planning
  • State Sales Tax & E-commerce Taxation
  • Estate Planning, Inheritance tax advice

To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:

  •  416-238-5920 (Greater Toronto Area, ON)
  • 604-538-8735 (Greater Vancouver Area, BC)
  • 780-702-2732 (Greater Edmonton Area, AB)


Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.

ABOUTAylett Grant Tax, LLP
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1

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