The Tax Blotter – Aug. 29, 2018
Aug. 29, 2018
Taxpayers often donate money or property to charity, but the tax results are mixed. Following are several recent developments.
Tax lift for giving more.
Do you want to help out charities even more in 2018? A little-noticed change in the Tax Cuts and Jobs Act (TCJA) provides an incentive. Previously, the deduction for contributions to qualified charitable organizations was generally limited to 50% of your adjusted gross income (AGI). The TCJA boosts this figure to 60% of AGI for 2018 through 2025. On the flip side, due to other changes in the law more taxpayers will be claiming the standard deduction this year instead of itemizing.
Shop ‘til you drop.
When you donate used clothing to charity, you can generally deduct the current fair market value (FMV) of the clothing on the donation date. In a new case, an avid shopper frequently bought clothing at discounted prices and then donated these brand-new items to charity. She claimed deductions based on the full retail price of the clothing. But the Tax Court limited her deduction to the discounted amount she actually spent on the items — not the original price (Grainger, TC Memo 2018-117, 7/30/18).
Keep travel records.
If you provide services on behalf of a charity, you may deduct unreimbursed expenses as a charitable contribution. For instance, a taxpayer in a new case used her car to help feed homeless people and transport gifts from her church. But she didn’t substantiate any of her travel, so the Tax Court denied the deduction. Note: In lieu of actual driving expenses, you can deduct a flat rate of 14 cents per mile traveled for charity, plus tolls and parking fees (Farolan, TC Summary Opinion 2018-28, 5/30/18).