The IRS’s basic rule is that a gift must be “delivered” to the church by December 31 for it to count as a contribution for that year. The date of delivery depends on how the gift was made and delivered. Here is a quick summary of the year-end cutoff for various gift delivery methods:
- In Person – Physically received by the church by Dec. 31
- US Postal Service – Postmarked by Dec. 31
- Private Delivery Service such as FedEx or UPS – Physically received by the organization by Dec. 31
- Credit Card — “Fully processed,” i.e., approved by the credit card issuer by Dec. 31
Contributions made by credit card
Contributions made to the church by credit card are deductible as a charitable contribution in the year that the charge is made. Therefore, contributions made by credit cards that are processed by midnight on December 31 will be deductible for the tax year. Charges processed any time after that will be deductible for the new tax year.
Contributions made by check
When a member mails a check to the church on the last day of the year, a postmark on the envelope of December 31 will be sufficient evidence that the gift was mailed on the last day of the year. Therefore, the contribution qualifies for a charitable deduction in that year.
Donation of Stock
Donations of stock allow a member to support causes important to them without affecting personal cash flow. Generally speaking, the most tax-advantaged approach is to donate stock held for more than one year that has appreciated in value. This provides for a larger charitable contribution and avoids tax on the capital gain. For losing stock, sell it first and then donate the cash. Individuals considering it should consult with their tax or financial advisor.
Consider Making a Qualified Charitable Distribution from an IRA
Making a direct transfer from an IRA allows a member age 70½ or over to avoid a tax hit on the annual required minimum distribution. In this case, the charitable contribution must go directly to the church, not the taxpayer first. This option requires some advance planning, so individuals considering it should consult with their tax or financial advisor.
Postdated checks. The date of mailing will not make any difference if the check is postdated. A postdated check is not an immediately payable contribution, but it is a promise to pay on the date shown.
Advance Charitable Deductions
If you regularly tithe to your church, you might consider pre-paying part or all of your 2019 tithing, thus advancing the deduction into 2018. This can be especially helpful to individuals who marginally itemize their deductions, possibly allowing them to itemize this year and then take the standard deduction for 2019.
In any event, the church must provide gift receipts with certain basic information to donors. You can find a useful overview of requirements in IRS Publication 1771, Charitable Contributions: Substantiation and Disclosure Requirements.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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