Managing Your Charitable Donations

In addition to the personal tax deductions allowed to be claimed for medical expenses, mortgage interest, and state & local taxes paid in a year, taxpayers are allowed to claim a tax deduction for donations to charitable organizations and qualifying tax-exempt private foundations.

As defined by the IRS, qualifying charitable organizations are: “Organizations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes and that meet certain other requirements are tax exempt under Internal Revenue Code Section 501(c)(3).”

The IRS requires accurate records to be kept as confirmation in order to substantiate any claimed charitable deductions.  Therefore, when making a donation to a qualified charitable organization, taxpayers should maintain proper records in the event of an IRS audit at a later date.  Basic taxpayer record keeping rules for cash (cash, check, credit card, EFT) donations are as follows:

  • Taxpayers must maintain either bank records or a written acknowledgement from the charitable organization noting the amount and date of payment. Bank records include bank statements, canceled checks and credit card statements that show the date of payment, the name of the charitable organization and the dollar amount of the payment.
  • For any single donation of $250 or more in any one day, taxpayers must receive a written acknowledgement from the charitable organization by the earlier of the date the taxpayer files his/her tax return or the due date plus extensions of the tax return.
  • For taxpayers that have set up charitable donations through a company payroll deduction plan, maintaining a copy of the W-2 which shows the amount withheld for charitable contributions over the course of the year will meet the substantiation rules. Additionally, a year-end employer paystub or employer provided document will also satisfy the record keeping rules.

For donations of non-cash items, such as clothing, furniture, housewares, etc., taxpayers will need a receipt from the charitable organization.  Often, the organization will hand taxpayers a blank receipt reporting only the date of the donation.  Taxpayers should complete the form by listing out the items donated, and the fair market value of the items – estimated as best they can as of the date of gift.  There are several on-line sites that provide valuation guides to help donors determine the value of their donated items.  One such resource published annually by The Salvation Army is their “Donation Valuation Guide”:

For taxpayers who donate a vehicle (generally automobiles, boats and airplanes) and claim a charitable tax deduction in the amount of $500 or greater related to the donated vehicle, the taxpayer should receive a Form 1098-C from the charitable organization reporting the proceeds from the sale of the vehicle by the organization within 30 days after the date of sale of the vehicle.  The reported sales amount is the value allowed to be claimed as a tax deduction for the donated vehicle.

Taxpayers are also allowed to claim a tax deduction for donating investments that are held in their brokerage accounts.  Donating long term capital gain property such as stocks, bonds and mutual funds that are held in a taxpayer’s financial portfolio, to a qualified charitable organization allows taxpayers to claim a tax deduction at the investment’s fair market value as of the date of donation.  By donating long term capital gain property, taxpayers can avoid paying the capital gains tax on the appreciated value of the investment while still being allowed to claim the full fair market value of the investment as a tax deduction.  For a donation of a short-term investment, taxpayers are only allowed a charitable deduction equal to the lesser of the cost basis of the security or the fair market value of the security at the date of donation.

When donating time or services to do volunteer work for a charitable organization, taxpayers are allowed to claim a charitable deduction for unreimbursed out-of-pocket expenses incurred while doing the volunteer work.  The qualified expenses must be nonpersonal and directly related to the services being performed for the charitable organization.  For a taxpayer’s record-keeping purpose, the taxpayer will need to obtain a letter of acknowledgement from the organization for the out-of-pocket expenses incurred of $250 or greater.  To substantiate the charitable services performed by the taxpayer, the acknowledgement letter must include a description of the service(s) performed by the taxpayer.  Taxpayers are not allowed to claim a charitable deduction for the “value of their services” provided on behalf of a charitable organization, all that is allowed to be claimed as a charitable deduction for tax purposes is the unreimbursed out-of-pocket expenses incurred specific to providing services that directly benefit the charitable organization while volunteering time to the organization.

For those taxpayers over age 70 ½ and who do not itemize deductions on their tax returns, a qualified charitable distribution (QCD) would be an easy way to make a charitable donation to a qualified charity and still be able to recognize a tax benefit.  Taxpayers age 70 ½ are allowed to take a distribution from their IRA and donate the distributed funds from the IRA directly to a charitable organization.  No tax deduction is allowed for the charitable donation, but the taxpayer does not recognize taxable income on the distributed IRA funds done as a QCD.  For the IRA distribution to be a QCD, this transfer of funds must be done as one transaction, directly from the taxpayer’s IRA to the charitable organization – the taxpayer cannot take a distribution from their IRA and separately write a check to the charitable organization.  For taxpayers age 73 or older, the QCD will also count toward the taxpayer’s annual required minimum distribution.  The maximum QCD allowed per taxpayer per year is $100,000.  A QCD can only be made to 501(c)(3) charitable organizations.   Contributing to private foundations or funding your donor advised fund via a direct IRA distribution would not qualify as a QCD.

Taxpayers are also allowed to make charitable contributions directly from their business.  Although the payment may be made directly from a taxpayer’s company’s operating bank account the payment is not reported as a business expense.  The payment will be allowed and reported as a charitable deduction on Schedule A, personal itemized tax deductions.

And, as we have all seen throughout the internet world, scammers are present everywhere.  Taxpayers need to be aware when solicited by unknown charitable organizations if the solicitation is for a legitimate charitable organization or not.  To help taxpayers verify a charity as being real or fake, the IRS has established a search tool on their website.  The link to the IRS Tax Exempt Organization Search is Tax Exempt Organization Search | Internal Revenue Service (

While gifting to exempt organizations will generally qualify for a tax deduction, there are several common donation scenarios that don’t qualify to be claimed as a tax deduction on your tax return.  The following list of items will not qualify as tax deductible donations:

  1. Donations to political candidates, political parties, and political actions committees (PACs).
  2. Donations to civic leagues and chambers of commerce.
  3. Donations to specific individuals for benevolent purposes to financially assist those individuals such as donating funds to a family to help them recover from a disaster or for an expensive medical procedure that they may not be able to afford.
  4. Guestimates and undocumented donations. Examples include small cash donations without having proper documentation while attending religious services or dropping a bag of clothes and housewares at the local donation drop-off bin without receiving a donation receipt.  Even for such small cash gifts, the IRS requires proof of the donation via a cancelled check, credit card statement or letter of acknowledgement of receipt from the religious organization for gifts less than $250.  Similarly, the IRS requires a receipt from the charitable donation site that is the recipient of property in kind donations listing out the donated items along with the fair market value of each item claimed on the list.
  5. Promises to pay and pledges to a charitable organization. Once the pledge has been paid it then qualifies as a charitable donation for tax purposes.
  6. The purchase of charitable fund-raising tickets. Lottery and raffle-based tickets that taxpayers purchase when sold by charitable organizations as part of their fund-raising do not qualify as a tax deduction.
  7. The cost of tickets to attend a charitable event. However, the amount of the ticket price that exceeds the value of the service or meal that is received by the attendee would qualify as a charitable tax deduction.  The charitable organization should provide the attendees of the event with the amount paid for the ticket that is in excess of value received – that portion of the cost will qualify as a charitable tax deduction.
  8. The value of a week’s stay at your vacation rental home that you donate to a charity auction event. Although you would be able to determine the value of the free week of use of the rental being donated, the IRS does not allow a tax deduction for “less than an entire interest” in a property.  Because you are only donating one week’s use of the property, this donation would be considered a “partial interest” and would not be a qualified charity deduction.  And conversely, the purchaser of the week’s rental use at the charity auction would only be allowed a charitable tax deduction for the excess of the price paid for the auction item above the market value of the week’s rental.
  9. The value of your time or services while volunteering your time to a charitable organization.


What to do if you Unexpectedly Receive a Hard Credit Inquiry?

Q:  I just had a hard credit inquiry alert even though I did not apply for a line of credit. Any advice on what to do?

A: That’s unsettling. Are you sure this wasn’t something done by the lender for your practice? Assuming this is in connection with a new line of credit:

1. First contact the lender that pulled your credit to notify them that you did not apply for a Line of Credit with them. There should be a phone number available, or you can look up the lender online. Lenders take concerns about fraudulent activity very seriously.

2. Sign up for credit monitoring through one of the 3 credit reporting agencies – TransUnion, Experian, Equifax. TIP – you might get your credit monitoring at a discounted price through AAA.

3. Lock the credit at the other two credit reporting agencies where you don’t have credit monitoring. NOTE – you’ll need to unlock the credit at all 3 agencies whenever a lender or anyone else needs to look at your credit. It’s a minor hassle, but worthwhile.

4. A good place for information on credit-related topics is This is a website that the 3 credit reporting agencies were required to set up to help out consumers. TIP: you can receive one free credit report from each agency annually.

5. Lastly, visit to report this potential identity theft and get a recovery plan.

Foreign Account Reporting Reminder

Below is a brief summary of reporting foreign accounts, gifts and inheritances. Please note that the penalties for non-compliance can be onerous.

If you inherit or receive a gift from a foreign person of more than $100k:

If you have a foreign account open at any time during the calendar year, no matter how low the balance:

  • Complete the questions at the bottom of the Schedule B attached to your personal return
  • Check the boxes stating that you have a foreign account open, no matter how low the value

If you have foreign accounts open that exceed $10k in any calendar year:

If you are married filing jointly and have foreign accounts with a combined value of more than $150k during the year or more than $100k at 12/31, or any other taxpayer with a combined value of more than $75k during the year or more than $50k at 12/31:

Social Security Max Increases to $168,600 for 2024

Most years, the government bumps up the maximum Social Security taxes that you can pay.  For 2024, the maximum wage base jumps to $168,600, an increase of $8,400, or 5.2%, over the max of $160,200 that was in place for 2023.

At a rate of 6.2%, the maximum Social Security taxes that your employer will withhold from your salary is $10,453. This is $521 higher than the 2023 max of $9,932. Employers then match any Social Security taxes withheld from their staff’s salaries.

Higher Medicare Taxes Due To The Affordable Care Act Passed In 2012:

Enacted more than ten years ago, the employee portion of the Medicare tax jumps from the current rate of 1.45% to 2.35% on earned income in excess of $200k for single individuals and $250k for married couples filing a joint tax return. As of now, the employer will continue to match their employees’ Medicare taxes at a rate of 1.45%, which means the total marginal Medicare tax will be 3.8% for high-income taxpayers. This tax is reported on the Form 8959.

For example, if you’re single, and earn wages of $500k from your job, expect to pay $2,700 in additional Medicare taxes (($500k – $200k) * .9%) for 2013 and beyond.

To increase taxes for high-income individuals even more, the Medicare tax continues to apply to unearned income. Anyone with income over the $200k or $250k threshold should expect to pay Medicare taxes at a rate of 3.8% on interest, dividends, capital gains, and net rental income (except if you rent office space you own to your practice) in addition to any federal and state income taxes due on this income. This tax is reported on the Form 8960.

Calculating the Self-employment Tax:

If you’re self-employed and earn more than $400 in net profit from your business, you’re subject to Social Security and Medicare taxes as well. Known as the “self-employment tax”, you’ll need to complete a Schedule SE to calculate this tax, and then report the amount due on your Form 1040 in addition to your federal income taxes due.

The self-employment tax is based on a Social Security tax rate of 12.4% and a Medicare tax rate of 2.9%. These rates are double those paid by employees, since a self-employed person must pay both the employee’s portion and the employer’s portion of both taxes. Remember, when you work as an employee, your employer matches the Social Security and Medicare taxes withheld from your pay.

Unlike most other taxes, when dealing with self-employment taxes, the more you earn, the less you pay.