Feeling Charitable? Be Sure You Can Substantiate Your Gifts
As the end of the year approaches, many people give more thought to supporting charities they favor. To avoid losing valuable charitable deductions if you itemize, you’ll need specific documentation, depending on the type and size of your gift. Here’s a breakdown of the rules:
Cash gifts under $250. A canceled check, bank statement or credit card statement will do. Or ask the charity for a receipt or “other reliable written record” that provides the organization’s name, the date and the amount of the gift.
Cash gifts of $250 or more. You’ll need a contemporaneous written acknowledgment from the charity stating the amount of the gift. That means you received the acknowledgment before the earlier of your tax return due date (including extensions) or the date you file your return. If you make multiple separate gifts to the same charity of less than $250 each (monthly contributions, for example) that total $250 or more for the year, you can still follow the substantiation rules for cash gifts under $250.
Noncash gifts under $250. Get a receipt showing the charity’s name, the date and location of the donation, and a description of the property.
Noncash gifts of $250 or more. Obtain a contemporaneous written acknowledgment from the charity that contains the information required for cash gifts, plus a description of the property.
Noncash gifts of more than $500: In addition to the above, keep records showing the date you acquired the property, how you acquired it and your adjusted basis in it. Also, file Form 8283.
Noncash gifts of more than $5,000 ($10,000 for closely held stock). In addition to the above, obtain a qualified appraisal and include an appraisal summary, signed by the appraiser and the charity, with your return. (No appraisal is required for publicly traded securities.)
Noncash gifts of more than $500,000 ($20,000 for art). In addition to the above, include a copy of the signed appraisal, not just a summary, with your return.
Finally, if you received anything in exchange for your donation, such as a book for making an online donation or food and drink at a fundraising event, ask the charity for the fair market value of the item(s). You’ll need to subtract it from your charitable deduction.
Saving taxes isn’t the primary motivator for charitable donations, but it may affect the amount you can afford to give. Substantiate your donations to ensure you receive the deductions you deserve.
Unlocking Tax Savings: The Benefits Of A Cost Segregation Study A cost segregation study allows a business property owner to accelerate depreciation deductions. That, in turn, enables the owner to reduce current taxable income and increase cash flow.
A cost segregation study combines accounting and engineering techniques to identify building costs that are properly allocable to tangible personal property rather than real property. It then allows the personal property to be reclassified for tax purposes and deducted over a much shorter depreciation period. This strategy has been consistently upheld in the courts.
Fundamentals of depreciation
Business buildings generally have a 39-year depreciation period. Typically, companies depreciate a building’s structural components (such as walls, windows, HVAC systems, plumbing and wiring) along with the building. Personal property (such as equipment, machinery, furniture and fixtures) is eligible for accelerated depreciation, usually over five or seven years.
Often, businesses allocate all, or most, of their buildings’ acquisition or construction costs to real property, overlooking opportunities to allocate costs to shorter-lived personal property or land improvements. Items that appear to be “part of a building” may, in fact, be personal property. Examples include removable wall and floor coverings, removable partitions, awnings, canopies, window treatments and signs.
Shine a light on outdoor savings
Rules for outdoor lighting, parking lots, landscaping and fencing are tricky but can still lead to current tax deductions in certain situations. These expenditures are generally treated as capital improvements, subject to the 15-year depreciation rule. For instance, if you replace your business lighting to upgrade it or provide greater security at night, it qualifies as a deductible capital improvement. Similarly, landscaping projects designed to boost your curb appeal or provide environmental benefits are considered capital improvements.
On the other hand, routine maintenance (such as the costs of mowing and watering the lawn surrounding your business building) typically fall into the category of deductible business expenses, just like minor repairs.
Worth checking out
Although the relative costs and benefits of a cost segregation study will depend on your particular facts and circumstances, it can be a valuable investment.
And, under the Tax Cuts and Jobs Act, the potential benefits of a cost segregation study may be even greater than they were years ago because of enhancements to certain depreciation-related tax breaks.
Contact the office for further details.