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Making “Tax Smart” Donations During Disaster Events

Tax Smart Disaster Relief Donations

Generosity of spirit is never more prevalent than during a disaster event. The Texas Gulf Coast has experienced widespread devastation as a result of Hurricane Harvey. In its aftermath, there are now hundreds of relief funds being set up and promoted to aid those impacted by the storm.

You clearly want to help, so how do you ensure that your generous donation will not only benefit those in need, but also be tax deductible? Here are a few things to consider to ensure you make tax deductible donations.

  • Verify tax exempt status. Ensure your recipient organizations have been granted 501(c )(3) tax exempt status by the Internal Revenue Service (IRS). These organizations have been established for charitable purposes and donations to them are tax deductible as allowed by law. You can confirm an organization’s exempt status by conducting a search on the IRS EO Select Check
  • Get a receipt. Organizations eligible to receive tax deductible donations are required to provide a receipt to donors for any gift of $250 or more. The receipt acknowledges the donation amount, date of donation, the organization’s tax exempt status and tax ID number. You should obtain and keep the receipt as additional support of your tax-deductible donation.
  • Be wary of crowdfunding. Crowdfunding sites such as GoFundMe or YouCaring are popular ways to raise money for various types of causes on social media. Since crowdfunding websites are open for use by anyone, many of the funding pages are not established by qualifying charitable organizations. Before giving through such sites, do your homework to ensure that your support is going to a charitable organization with qualifying tax-exempt status.
  • Consider donating appreciated securities. When you donate appreciated stocks, bonds or mutual funds to a charity or donor advised fund you are able to claim the fair market value of the security as a charitable contribution deduction. This also avoids capital gains tax since the appreciated security is being donated instead of sold.

When a qualifying tax deduction is expected, donors should exercise care when making gifts of cash or property to ensure the gift benefits those truly in need, but also achieves the expected tax reduction impact.

As the Texas Gulf Coast moves forward in its recovery in the aftermath of Hurricane Harvey, we recommend donors keep these tips in mind.

Annjeanette Yglesias, CPA is a tax manager at PKF Texas, she may be reached at ayglesias@pkftexas.com.