Check deductibility before making year-end charitable gifts

As the holidays approach and the year draws to a close, many taxpayers make charitable gifts — both in the spirit of the season and as a year-end tax planning strategy. But with the tax law changes that go into effect in 2018 and the many rules that apply to the charitable deduction, it’s a good idea to check deductibility before making any year-end donations.

Confirm you can still benefit from itemizing

Last year’s Tax Cuts and Jobs Act (TCJA) didn’t put new limits on or suspend the charitable deduction, like it did to many other itemized deductions. Nevertheless, it will reduce or eliminate the tax benefits of charitable giving for many taxpayers this year.

Itemizing saves tax only if itemized deductions exceed the standard deduction. For 2018 through 2025, the TCJA significantly increases the standard deduction, to $24,000 for married couples filing jointly, $18,000 for heads of households, and $12,000 for singles and married couples filing separately.

The nearly doubled standard deduction combined with the new limits or suspensions of some common itemized deductions means you may no longer have enough itemized deductions to exceed the standard deduction. And if that’s the case, your donations won’t save you tax.

So before you make any year-end charitable gifts, total up your potential itemized deductions for the year, including the donations you’re considering. If the total is less than your standard deduction, your year-end donations won’t provide a tax benefit.

You might, however, be able to preserve your charitable deduction by “bunching” donations into alternating years. This can allow you to exceed the standard deduction and claim a charitable deduction (and other itemized deductions) every other year.

Meet the delivery deadline

To be deductible on your 2018 return, a charitable gift must be made by Dec. 31, 2018. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:

Check. The date you mail it.

Credit card. The date you make the charge.

Stock certificate. The date you mail the properly endorsed stock certificate to the charity.

Make sure the organization is “qualified”

To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions.

The IRS’s online search tool, Tax Exempt Organization Search, can help you easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access this tool at Information about organizations eligible to receive deductible contributions is updated monthly. Remember that political donations aren’t deductible.

Consider other rules

We’ve discussed only some of the rules for the charitable deduction; many others apply. We can answer any questions you have about the deductibility of donations or changes to the standard deduction and itemized deductions.

© 2018

Tax Planning for Business Sales and Purchasing

Whether you're selling or purchasing a business, conscientious tax planning is essential. Whenever a business is transferred, there are tax ramifications for both buyer and seller. These tax ramifications could greatly affect the value of the business sale for both parties -- and it can be even more complicated when partnerships or more complex entities are involved.

The Tax Implications of Selling a Business

tax advisor for selling businessWhen you sell a business, you need to pay taxes on your gains -- the amount of profit that you made off of the sale your business. At its most simplistic, the amount of profit in your business is the amount that you've sold your business for less the amount that you invested into it. But, naturally, the situation can be far more complicated than that. The amount of money you've put into your business is referred to as the tax basis, and it is affected by things such as depreciation, casualty losses, selling expenses, and other factors.

You may be able to sell your business either for a lump sum or a scheduled payment structure, known as an installment sale, both of which will also have tax ramifications -- a lump sum payment will be taxed immediately, whereas scheduled payments will be taxed upon each received payment. Depending on your personal tax situation, scheduled payments may be preferable. But either way, the taxes will need to be paid upon your next tax filing.

There are a few special situations that may apply when selling your business. If your business is being purchased by another business, it may be able to be organized as a tax-free merger. If your business includes long-term capital gains, this will be taxed at a lower rate. Further, assets and stock sales have different tax consequences than an ordinary business sale.

The Tax Implications of Buying a Business

The tax implications for a business buyer tend to be fairly less complex than for a seller -- but there are still some complications that may arise. In general, the purchaser of the business will not be responsible for federal, state, and local taxes that are owed upon the company's sale. This tax liability will be the onus of the seller of the business. However, if the business does owe these taxes, they will likely need to be paid during the escrow process. If they exceed the amount that the seller would make from the sale (and the seller cannot cover the additional funds), the business sale may not continue.

selling a business what it means for taxesUpon acquiring ownership of the business, the buyer will assume responsibilities regarding taxes for that business. This includes payroll taxes, sales taxes, general excise taxes, and, naturally, income taxes. To ease this transition, the buyer should learn about the company's existing and scheduled tax liabilities, so that they can be paid quickly following the sale.

It's essential to consult with a company who specializes in business accounting and tax services before making the move to either purchase or sell a company. At Dukhon Tax and Accounting, you can get a free tax consultation regarding your purchase or sale. Dukhon Tax and Accounting provides expert income tax prep, tax consultations, and general tax and bookkeeping services for businesses and individuals throughout Allston.