Planning 2016: Sophisticated Charitable Giving

mary_croppedSignificant tax savings can be achieved through a properly planned program of gifts to charity. Although a contribution may be motivated by humanitarian reasons, it is nevertheless wise to take the tax considerations into account when making a contribution. Charitable giving can be divided into two general categories. First, there are donations that are made on a regular basis and involve relatively small amounts. Second, there is the large extraordinary donation often associated with estate planning. Different planning concepts govern each type of donation.

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Georgia Education Expense Tax Credit – Do Not Wait, Apply for Approval Now

Mary 1The Georgia Department of Revenue has already approved 50% of the $58M education expense tax credits allowed for 2014.  Last year all of the credit cap was approved by May 9, 2013.  It is expected that the entire 2014 credit cap will be met by the end of January 2014.

This tax credit is for contributions made to Georgia Student Scholarship Organizations.  These organizations provide scholarships for students to attend primary and secondary private schools.  The contribution is deductible on your individual federal income tax return as a charitable contribution, and a dollar for dollar tax credit is allowed to offset your Georgia income tax.  Taxpayers must apply for pre-approval in order to participate in this program.  Once the annual credit cap is met, no additional applications are approved.

For more information regarding this or any other tax planning concern, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.

Conservation Easements – Easy Tax Savings

Ian 1You may not be able to have your cake and eat it too, but you can own your land and donate it too.

Conservation easements allow a property owner to maintain ownership of their land while also ensuring that it will be preserved in perpetuity.  This allows a land owner to maintain private ownership of their land while also limiting development, essentially making a charitable donation and therefore receiving a tax deduction for the reduction in value under IRC Sec. 170.

Although the landowner will maintain possession of the land, the conservation easement burdening the land is permanent and runs with the land, so the land can be transferred, but the conservation easement restrictions will always remain in place.

Why would you want to burden your land forever?  Besides the charitable aspect, a landowner can save a significant amount of real estate taxes, income taxes, and estate taxes with a conservation easement.  In fact, right now, a qualified farmer who puts a conservation easement on the farm can offset up to 100 percent of his or her federal taxable income, leaving the farmer with ZERO income tax for the year, and up to a 15 year carryover of any unused deduction.  Additionally, there are state tax credits in Georgia and many other states for conservation easements.

However, at the end of 2013, the income deduction limit is set to revert to 30% of a donor’s income and only a five year carry forward.

For example, in 2013, if a farmer who makes $500,000 a year sets up a conservation easement worth $1.5 million, the farmer can deduct $500,000 in 2013 and carry forward the $1,000,000 excess charitable deduction to offset income in future years.  However, if that farmer waits until next year and Congress does not pass the Enhanced Easement Incentive, that same $1.5 million conservation easement would only be worth a $150,000 deduction and a carryover period of only five years.  Therefore, the farmer would lose out on $600,000 of the deduction.

The amount deductible from tax will be the difference between the value of the property before the conservation easement and the value of the property after that conservation easement, which must be determined by a qualified appraiser.

The landowner grants the conservation easement to either a government unit or a charity and the contribution must be exclusively for “conservation purposes.”

The state of Georgia gives a dollar-for-dollar income tax credit for 25% of the fair market value of the donation, up to a maximum credit amount of $250,000.  It can be carried forward for 10 years.  Additionally excess credits can be sold to other taxpayers for cash.  However, there is a $5,000 application fee.

For more information regarding this or any other estate planning concern, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.

Georgia Private School Tax Credit – Time Is Running Out!

Time is running out for one of the easiest ways to save on your state and federal income taxes!  The Georgia Private School Tax Credit law is very close to hitting its maximum funding, so don’t get locked out!  Out of $58 million approved for this program, less than $4 million in contributions may be remaining.

Direct your Georgia income tax dollars to private elementary and high schools (receive dollar for dollar tax credit for amounts contributed to charity) and still get a federal tax deduction to save more tax.  If you itemize, this is a win-win situation.

Georgia Statute 48-7-29.16 establishes an income tax credit for taxpayer funds used to support a qualifying student scholarship organization.    Two examples are the Georgia GOAL Scholarship Program for 107 of Georgia’s private schools and the GRACE Scholar program for Catholic Schools in Georgia.  A full listing of all student scholarship organizations can be found at the Georgia Department of Education’s website at http://www.doe.k12.ga.us/External-Affairs-and-Policy/Policy/Documents/SSO%20List.pdf

Participants can give up to $1,000 per individual or $2,500 for married taxpayers filing a joint return.   For each dollar given, Participants will get a dollar of credit against their Georgia income taxes.  In addition, Participant’s, depending on their circumstances (whether they itemize or are subject to the AMT), may be entitled to take federal charitable deduction for the contribution.     For example, if a Participant contributes $1,000, she will get a $1,000 credit against her Georgia taxes and possibly a $1,000 charitable deduction for federal income tax purposes.

There is virtually no downside to taking this credit.  The Georgia credit allows you to simply redirect taxes you would otherwise pay to a scholarship program of your choice.  The federal charitable contribution deduction may reduce your federal taxes.  This is a no lose proposition.

To take advantage, Participants must fill out Georgia Department of Revenue Form IT-QEE-TP1 (see https://etax.dor.ga.gov/inctax/2011_forms/TSD_HB-1133_FORM_IT-QEE-TP1.pdf) and submit it AS SOON AS POSSIBLE (in order to assure that you will receive your confirmation back from the State of Georgia timely).    The participant should receive a confirmation that their contribution has been accepted.  Once received, the confirmation should be sent along with a check for the contribution amount to the scholarship program of the Participant’s choice.

The form takes about ten minutes to fill out.  For more information or for assistance please contact Joe Nagel in our office at 404-255-7400 or visit our website at www.hoffmanestatelw.com.  This is a tax benefit that seems “too good to be true” but it works!

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.

Charitable Deductions Gone Awry

Charitable deductions can be confusing and mistakes can be expensive. Recently, a California couple found this out the hard way. On May 29, 2012, a case from the U.S. Tax Court denied the couple an $18.5 million charitable deduction because of a technicality on the deduction form. The couple donated a valuable piece of real estate to charity, but did not follow the Commissioner’s exact directions on how to document the deduction. Josef Mohamed is a real-estate broker and a certified real-estate appraiser, so he believed he knew how to properly set up a charitable remainder trust and file the tax returns himself. Mr. Mohamed even went so far as to intentionally under value the property by nearly $2 million to minimize the risk of claiming too large a deduction. Unfortunately, Mr. Mohamed did not read the instructions properly and did not attach the qualified appraisals to his tax returns. Although the judge expressed sympathy towards the complexity of the forms and noted the couples under-valuation of the property; he denied the charitable deduction nonetheless.

Do not fall victim to the complexities of the IRS and the ever changing tax code (the charitable deduction form has changed since the Mohamed’s donation). This case demonstrates that good intentions will not garner mercy from the IRS, even when the fault lies in a seemingly minuscule technicality. Get the full value of your charitable deductions by using Hoffman & Associates and avoid the Mohamed’s costly headache.

http://www.ustaxcourt.gov/InOpHistoric/MohamedMemo.TCM.WPD.pdf

Deadline: Act Quickly to Take Advantage of Tax Savings

Direct your Georgia income tax dollars to private elementary and high schools (receive dollar for dollar tax credit for amounts contributed to charity) and still get a federal tax deduction to save more federal tax.  If you itemize, this is a “no brainer”!

Georgia Statute 48-7-29.16 establishes an income tax credit for taxpayer funds used to support a qualifying student scholarship organization.    Two examples are the Georgia GOAL Scholarship Program for 107 of Georgia’s private schools and the  GRACE Scholar program for Catholic Schools in Georgia.  A full listing of all student scholarship organizations can be found at the Georgia Department of Education’s website at

http://public.doe.k12.ga.us/DMGetDocument.aspx/May 2, 2011 SSO List.pdf?p=6CC6799F8C1371F62F852EB6D75299360D76B6C7ABA0F68A8B177675F78FA12A&Type=D

Participants can give up to $1,000 per individual or $2,500 for married taxpayers filing a joint return.   For each dollar given, Participants will get a dollar of credit against their Georgia income taxes.  In addition, Participant’s, depending on their circumstances (whether they itemize or are subject to the AMT), may be entitled to take federal charitable deduction for the contribution.     For example, if a Participant contributes $1,000, she will get a $1,000 credit against her Georgia taxes and possibly a $1,000 charitable deduction for federal income tax purposes.

There is virtually no downside to taking this credit.  The Georgia credit allows you to simply redirect taxes you would otherwise pay to a scholarship program of your choice.  The federal charitable contribution deduction may reduce your federal taxes.  This is a no lose proposition.

To take advantage, Participants must fill out Georgia Department of Revenue Form IT-QEE-TP1 (see  https://etax.dor.ga.gov/inctax/2008_forms/TSD_HB-1133_FORM_IT-QEE-TP1.pdf) and submit it by November 1st (in order to assure that you will receive your confirmation back from the State of Georgia timely).    The participant should receive a confirmation that their contribution has been accepted.  Once received, the confirmation should be sent along with a check for the contribution amount to the scholarship program of the Participant’s choice.

The Georgia Department of Revenue is required to provide pre-approval within 30 days of submission of the form.  Therefore, to ensure you have sufficient time to make your contribution by year end, submit your application to the Georgia Department of Revenue in early November.

The form takes about ten minutes to fill out.  If you need help, call Joe Nagel in our office.  This is one of those tax items that is “too good to be true” but it works!

CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax information contained in this communication, including attachments, was not written to be used and cannot be used for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.  If you would like a written opinion