Today TaxMama® hears from Jenenne in the TaxQuips Forum with this sad story. “At my husbands job they just found out that a fellow employee has been given 3-5 months left to live. The doctors say nothing can be done for him. Everyone is scrambling trying to get some money together for him to be able to take the “trip of his dreams.” Two questions in one. First I have a pair of concert tickets that I would like to donate to the auction to raise money. Can I deduct the cost of the concert tickets when itemizing charity donations? Also, if bidding on something for this auction, say that the cost of the item/value is $100 and I bid $250 and win, can I deduct the difference of $150 of the value when itemizing charity donations? Are these types of donations, when helping a person or family out deductible?”
That is such a wonderful thing you are all doing.
But you ALL need to understand these ‘donations’ are all purely GIFTS. There is no tax-deductible component whatsoever. When you give money directly to a person, it’s not deductible for tax purposes.
You must give the money to a recognized non-profit organization or recognized religious organization. AND if you DO give the money to a recognized charity so it is specifically earmarked for this man? Again, it won’t be deductible. You cannot designate charitable funds for anyone’s specific benefit. Now, isn’t THAT silly.
There IS a way to do this. You hear about funds being raised on the news all the time for accident victims or especially ill people.
1) You set up a charitable organization.
2) The purpose of this organization would be, let’s say, to help all people at this company who are dying of this specific illness – or for any reason.
3) Everyone makes donations.
4) The money goes to the only person who qualifies (or others, if others also qualify).
5) When the funds are all expended and no more are being collected, you dissolve the charity. Or…you just continue the charity and help other people at work with special problems.
OR…your friend could apply to a charity for help. Once the charity agrees to help him, you could all make your donations to that charity, in gratitude. But they cannot agree to fund him, predicated on the promise of receiving donations. Do you understand the distinction?
Overall? It’s just easier to gift him the money, don’t you think?
And remember, you can find answers to all kinds of questions about donations and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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