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A festive year-end financial checklist with a piggy bank on the right and a Christmas tree in the foreground - Tax Benefits

Year-End Gift Giving With Tax Benefits

The holiday season is a time for giving, whether to loved ones, cherished charities, or worthy causes. But with the abundance of charitable appeals during this time, it’s crucial to ensure your donations reach legitimate organizations and optimize your tax benefits. This article equips you with essential tips for making informed and tax-savvy charitable contributions this holiday season.

Beware of Holiday Scammers

While the spirit of giving flourishes, unfortunately, so do scams. Be wary of unsolicited phone calls, emails, texts, or social media appeals, especially those from unfamiliar organizations. Research the charity thoroughly before donating, utilizing resources like Charity Watch or other online watchdogs.

Strategies for Wise Giving

  • Support established charities: Prioritize reputable organizations with a proven track record. Steer clear of unfamiliar entities that appear suddenly.
  • Ask informed questions: If contacted by a fundraiser, inquire about their affiliation, percentage of donations reaching the cause, and their compensation structure. Unclear or unsatisfactory answers should raise red flags.
  • Protect your personal information: Never share sensitive details like credit card numbers or bank account information unless you’re confident in the charity’s legitimacy.
  • Avoid cash donations: Opt for traceable methods like checks, credit cards, or online platforms. Cash contributions lack documentation and are ineligible for tax deductions.
  • Never wire money: Wiring money is akin to sending cash, offering no recourse if it falls into the wrong hands.
  • Verify local charity claims: If an appeal claims to support a local group (e.g., firefighters), confirm their legitimacy with the group directly.

Maximizing Tax Benefits

  • Qualified tuition payments: Directly paying a student’s tuition to a qualified institution qualifies as a tax-exempt gift, reducing your gift tax burden. However, it doesn’t qualify for a charitable deduction on your income tax return.
  • Qualified Tuition Programs (529 plans): Contribute to these plans for future educational expenses. Earnings are tax-free when used for qualified education expenses, and contributions are subject to gift tax only if exceeding the annual exclusion amount.
  • Qualified Charitable Distributions (QCDs): Individuals aged 70½ or older can transfer up to $100,000 annually from their IRAs directly to qualified charities, avoiding income tax on the distribution. Consider this option for smaller contributions.
  • Donor-Advised Funds (DAFs): Make a substantial charitable donation this year and distribute the funds over time. This strategy is ideal for large donations in high-income years. Sponsoring organizations manage the fund and handle tax reporting for a fee. You receive a tax deduction for the entire donation in the contribution year, and the invested funds grow tax-free until distributed.

Additional Tax-Smart Giving

  • Business equipment gifts: If your spouse is self-employed, equipment purchases for their business qualify as a business tax deduction in the year of use.
  • Employee gifts: Infrequent gifts of minimal value to employees are considered de minimis fringe benefits and are tax-free for both parties. However, cash gifts are taxable income for the employee.
  • Individual monetary gifts: For high net worth individuals, lifetime gifts to individuals reduce your estate tax exclusion. However, the annual exclusion of $16,000 per recipient allows tax-free gifting without impacting your estate tax exclusion. Remember, estate tax laws are subject to change based on political shifts.

Documentation and Timing

  • Maintain documentation: For tax deductions, keep records of all charitable contributions, including receipts, bank statements, or written acknowledgments from the organization. Specific requirements apply for cash contributions exceeding $250 and non-cash donations.
  • Shopping mall donations: Cash contributions in collection kettles typically lack receipts and are ineligible for tax deductions.
  • Holiday toy drives: Save purchase receipts for donated toys and request verification from the sponsoring organization. If verification is unavailable, the IRS allows a deduction of up to $249 with documented purchase.
  • Maximize deductions: Charge charitable contributions to credit cards before year-end for 2022 deductions, even if you pay the bill in 2023. Checks mailed in 2022 count for the same year.


By following these tips and conducting thorough research, you can ensure your charitable contributions make a positive impact while maximizing your tax benefits. Remember, consulting a tax professional for personalized advice is always recommended. Happy Holidays and happy giving!

JS Morlu LLC is a top-tier accounting firm based in Woodbridge, Virginia, with a team of highly experienced and qualified CPAs and business advisors. We are dedicated to providing comprehensive accounting, tax, and business advisory services to clients throughout the Washington, D.C. Metro Area and the surrounding regions. With over a decade of experience, we have cultivated a deep understanding of our clients’ needs and aspirations. We recognize that our clients seek more than just value-added accounting services; they seek a trusted partner who can guide them towards achieving their business goals and personal financial well-being.
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