In order for a charitable donation to qualify for a charitable deduction on the donor’s tax return, the date of the gift must be executed on or before December 31 of a given calendar year. But what does that mean?
Generally, a gift is considered complete when a donor relinquishes control of an asset. This can vary depending on the type of asset donated and method of delivery. Here are some of the most common scenarios you might encounter:
In-Person Delivery
If a donor delivers cash or a check to a charity’s representative, the gift date is the date the representative receives the cash or check.
Delivery via the U.S. Postal Service
For check donations mailed via the U.S. Postal Service, the gift date is considered to be the date the donor places the gift in the mail—sometimes referred to as the “mailbox rule.” That said, charities are going to look at the date the gift was postmarked as evidence of when it was placed in the mail, so be sure to get that envelope routed so it is postmarked on or before December 31. (The same rules apply to cash, but it is generally not advisable to mail cash.)
Delivery via Private Delivery Service
The mailbox rule does not explicitly extend to cover charitable contributions carried by private delivery services, like UPS or FedEx. A check sent by private delivery service is generally deemed delivered on the day it arrives at the charity’s office. (For more details, please reference GiftLaw section 1.1.2—provided courtesy of The Columbus Foundation.)
Credit Card Donations
When donating via credit card—online or in person—the date of the gift is the date when the charges are made on the cardholder account, which typically happens immediately. The date the charge is paid off is not a factor.
Securities Transfer
When transferred electronically, the gift is complete on the date the shares are received in the charity’s account. Execution of securities transfers is not instantaneous, and some gifts of non-cash asset, like mutual funds, can take several weeks or longer to process, so plan ahead.
Cash Wire
When transferring cash via electronic funds transfer or cash wire, the gift is complete on the date the cash wire is received in the charity’s account.
Qualified Charitable Distribution (QCD) from an Individual Retirement Account (IRA)
Most IRA custodians transfer QCDs—also known as charitable IRA rollovers—via check or electronic transfer directly to the charity. However, some IRA custodians issue a check payable to the charity, but send the check to the donor for forwarding to the charity. This transaction will still qualify as a QCD if the check is issued by the IRA custodian, made payable to the charity, and the owner delivers the check prior to December 31 of the applicable year. Delivery may be made by physical transfer to an agent for the charity or by placing the check in the U.S. Postal Service mail by December 31 of the appropriate year. Different rules apply if the donor has check writing privileges on the IRA account. If the donor has an IRA checkbook and writes a check to charity, the funds must clear in the year of the check's issuance.
Donor Advised Funds (DAFs)
If a donor is making a gift into a DAF, the date of the gift is governed by the aforementioned scenarios. If a donor is making a grant out of a DAF, the date of that grant is not a factor for their income tax purposes, because they already received a deduction at the time the gift was received into the DAF. (Often, donors stress about year-end grantmaking out of their DAF—usually in response to solicitations—when there is no actual urgency, at least from a tax perspective. However, there is a very real tax deduction deadline that occurs at year-end for giving into a DAF.)
The time for year-end gift planning is now! If you have any questions about year-end giving or grantmaking, or how to be more strategic (and less stressed) about charitable planning, don’t hesitate to contact us.
For 80 years, The Columbus Foundation has served as the vehicle through which thousands of individuals, families, and organizations have expressed their ideals and optimism through philanthropic investment—in central Ohio, and throughout the United States.
About The Columbus Foundation
The Columbus Foundation serves thousands of individuals, families, and businesses that have created unique funds and planned gifts to make a difference in the lives of others through the most effective philanthropy possible. The Columbus Foundation is Your Trusted Philanthropic Advisor and is one of the top 10 largest community foundations in the country.
