Charitable Deduction and Other Indexed Tax Adjustments for 2018
In his Estate Planning and Philanthropy column, Conrad Teitell writes: Not exciting—but important to know: Each year IRS adjusts charitable gift premium rules, tax tables, personal exemptions, standard deductions and other tax provisions. Here are the key charitable figures for 2018 from Rev. Proc. 2017-58, 2017-45 IRB 489 (Nov. 6, 2017) and Rev. Proc. 2018-18, 2018-10 IRB 392 (March 5, 2018).
April 20, 2018 at 02:45 PM
4 minute read
Not exciting—but important to know: Each year IRS adjusts charitable gift premium rules, tax tables, personal exemptions, standard deductions and other tax provisions. Here are the key charitable figures for 2018 from Rev. Proc. 2017-58, 2017-45 IRB 489 (Nov. 6, 2017) and Rev. Proc. 2018-18, 2018-10 IRB 392 (March 5, 2018).
Charitable deductions not reduced for insubstantial donor benefits—2018 safe harbors. Donors needn't reduce their charitable deductions when they receive low-cost articles or items of “insubstantial value” under Rev. Proc. 90-12, 1990-1 CB 471 and successor rulings. Reg. §1.170A-13(f)(8).
For 2018, a charity can tell a donor that his or her gift is fully deductible if:
• The donor receives benefits having a fair market value of $108 or 2 percent of the payment, whichever is less, or
• The donor gives the charity at least $54.00 and receives a low-cost or token item (e.g., a bookmark, mug or T-shirt). The item must bear the charity's name or logo and cost the distributing charity—or the charity on whose behalf the item is distributed—no more than $10.80.
An exception. One sentence long buried in Rev. Proc. 90-12, 1990-1 CB 471, bears highlighting: “These guidelines describe a safe harbor; depending on the facts in each case, benefits received in connection with contributions may be 'insubstantial' even if they do not meet these guidelines.”
Comment. Thus a donor who gives $1 million and receives an item worth $200 might still be able to deduct the entire payment—even though IRS's safe-harbor test isn't met.
What if token items were themselves donated, and thus cost the charity nothing? In that case, says IRS, the charity must make a reasonable estimate of what the items would have cost, had they been purchased.
Safe harbor for unsolicited freebies. Donors needn't reduce their deductions when they receive unsolicited free, low-cost articles as part of a charity's fundraising efforts. Rev. Proc. 92-49, 1992-1 CB 987; Reg. §1.170A-13(8)(f)(i).
How can an item be both “free” and “low-cost”? It has to be free to the donor, and low-cost to the distributing charity—or the charity on whose behalf the item is distributed. For 2018, the low-cost article has to cost the charity—or the charity on whose behalf the item is distributed—no more than $10.80.
A donor needs a receipt in hand from a charity to claim a charitable deduction of $250 or more. If it's an item of insubstantial value (as just described) the item may be ignored for substantiation purposes. Reg. §1.170A-13(f)(8)(i)(A). Thus the receipt could read: “No goods or services were given in exchange for your gift.” Presumably, the receipt could say “we gave you token benefits but they can be disregarded when claiming your charitable deduction.”
Optional standard mileage rates. The mileage rate for a volunteer's use of an automobile for charity in 2018 is 14 cents per mile. Volunteers may also deduct parking fees and tolls—but they should keep accurate odometer readings. The standard charitable mileage rate is not indexed for inflation. It is fixed by the Code and Congress hasn't raised it for some time. Instead of using the standard rate, volunteers can deduct their actual allowable expenses for gas and oil (tolls and parking too) provided proper records have been kept (e.g., credit card receipts, canceled checks, travel diary). However, insurance and depreciation on the car aren't deductible.
Limit on itemized deductions for high income taxpayers repealed for 2018 through 2025. The Tax Cuts and Jobs Act of 2017 repealed the “Pease” provision placing a limit on the charitable and a number of other itemized deductions for high-income taxpayers.
Conrad Teitell is a principal at Cummings & Lockwood in Stamford, Conn.
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