By Beth Mast, CPA, Tax Manager
As we approach the end of the year, there are many tax savings and year-end planning opportunities being implemented. In the midst of year-end and the holiday season of giving, it’s important to obtain a clear understanding of whether actions taken in regard to gifting and charitable giving during the remaining few days of the year constitute as activity for 2015 or 2016.
When it comes to the timing of gifting, there are a few key guidelines to remember:
- If you make a gift by check, make certain that the donee deposits it by December 31. For federal gift tax purposes, this will allow the money to count as a 2015 gift.
- If you do not want to rely on the donee to deposit the money into his or her bank account before the end of the year, you can give a certified check. As long as this is given before year-end, it will count as a 2015 gift regardless of when the donee deposits it.
- When giving securities, you should be sure to endorse them over to the donee and deliver them by year-end. This will allow the gift to count for 2015. Alternatively, if you send them to the corporation in order to be retitled too late in the year, the process may not be completed by December 31.
- As a reminder, be sure to take advantage of the full annual exclusion during 2015, which is $14,000 per donee. Any amount not used is gone forever.
As it pertains to the timing of tax-deductible donations to charities, it is important to keep the following items in mind:
- If you are writing a check and the check is in the mail by year-end, you’re able to take the tax deduction for 2015.
- For any charges made with a bank credit card, the deduction is claimed in the year that you charged the expense. It does not matter when you pay the bill, even if it is in 2016.
- For any charges made with a retail store credit card, the rules are different. The deduction can be claimed only for the tax year in which you actually pay the bill.
As there is a lot to keep in mind during the last few days of the year, it is essential to recognize the rules of both gifting and giving. This includes understanding the relevant timing of these actions in order to receive the benefit of your year-end decision making.