Tikkun olam calls on Jews to help “mend the world” and, in doing so, to be concerned about the welfare of others, including the feeding, housing and health of all. Jews can help close the gaps in social welfare through giving to the poor and disadvantaged, or to organizations and institutions that support them. Jews can also reflect their values and traditions and create a family legacy by establishing short- and long-term charitable giving goals.
Short-term charitable giving
Charitable giving before the end of 2018 can help reduce personal and business tax bills. The IRS rewards generosity with tax perks for certain charitable contributions. Most public schools, religious institutions and nonprofit organizations automatically qualify for a tax deduction. Smaller institutions, political campaigns, business associations and for-profit organizations likely do not. If you are uncertain, ask for documentation of eligibility or confirm the group’s charitable status with the IRS registry. If you mail a check or make a credit card donation by Dec. 31, you can take the tax deduction in 2018. This is true even if the check is cashed in 2019 or the credit card bill is paid in 2019.
To claim the tax deduction, you must know the value of the gift. Cash is easy to value. The donation of real or personal property (e.g., vehicles, household goods or antiques) may be claimed based on the item’s fair market value at the time the donation is made, not at the time the item was purchased.
Gifts of time are not deductible. However, you can deduct mileage and the value of any items purchased (e.g., cupcake ingredients). Non-cash contributions totaling more than $500 require taxpayers to submit IRS Form 8283 with their tax return. Non-cash contributions totaling more than $5,000 are to be professionally appraised.
Under the Tax Cuts and Jobs Act passed in 2017 and effective this year, taxpayers must itemize their charitable deductions. Deductions should be listed individually on Schedule A of IRS form 1040. Making a charitable gift without itemizing it may result in a failure to realize the deduction.
Even without the benefit of the deduction, the benefits of end-of-year charitable giving are far-reaching and even the smallest contribution can be considered an effort at tikkun olam.
Long-term charitable giving
Long term, and typically larger contributions, are often made through personal estate planning. Such plans may include bequests made through a will or trust, naming a charitable organization as a beneficiary on a life insurance policy, or creating a charitable lead or charitable remainder trust.
Regardless of the vehicle of the contribution, there are some important considerations when making charitable estate plans.
First, you should determine how much of your total estate is to be gifted. The charitable gift can be valued as either a percentage of the estate or may be a specific monetary sum. If electing to give a specific dollar amount, donors should make sure there will be enough money in the estate to cover the gift and fulfill other testamentary wishes, such as inheritances to family members. If there is a chance the estate will be “short,” the donor should prioritize between charitable and non-charitable giving.
After determining how much of the estate will be gifted, donors should select the charity to receive the gift and evaluate whether such donation warrants the creation of a fund, scholarship or other name-designation. Many charities request donors advise them of the planned gift and provide language to be incorporated into the donor’s estate plans. Charities may also request the donor complete a charitable agreement to ensure the gift is used for the intended purpose.
If charitable giving is a priority for you, now or in the future, you should talk to estate planning and tax professionals about the best mechanism and timing for your charitable gift-giving. JN
Allison L. Kierman is the managing partner of Kierman Law PLC, an Arizona estate planning law firm, and is a member of the board of directors at Congregation Beth Israel. For more information, visit kiermanlaw.com.