Social Question

JLeslie's avatar

Do you think we should get a tax break for donating to our friends or family in need?

Asked by JLeslie (59761points) December 16th, 2015 from iPhone

Let’s say they are officially on disability, food stamps, or some other government help and a friend or family member instead of selling their old car gives it to them. Or, gives them money, or rents an apartment to them way below the market value. I know people who have done all of these things. Should the person helping be able to claim it on their taxes like other charitable contributions?

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16 Answers

ibstubro's avatar

Interesting question.

My first reaction is that if you can’t afford to just do it, then don’t.
Obviously, the people you knew could afford to give that away, of they wouldn’t have.

What’s interesting is if you switch the question around a bit and ask “Should you be able to designate the recipient of your charitable contributions, as long as that person is already clearly qualified?”
On the face, I’d say “Yeah, why not?”
After thinking about it for about 5 seconds I know there’s no way to prevent people from abusing that.

It would be nice if there was a way you could give your car to a truly needy friend or neighbor and get the deduction. It would be incentive to charity with the deduction helping offset the loss you’d take not trading in.

elbanditoroso's avatar

No, a tax break for helping family is ripe for abuse, as @ibstubro points out.

If people were honest, it wouldn’t be an issue. But people are not honest.

LuckyGuy's avatar

And the donation might put them over an income or asset threshold that can invalidate their public assistance.

ibstubro's avatar

If I had to have the write-off in order to do the deal, I wouldn’t be above contacting local not-for-profits and see if they would care to facilitate the transaction on a handshake alone. Say, you give the car to them, and they in turn verbally agree to give it to your needy party.

Better yet, they rent it to your recipient for an amount that covers insurance, taxes and licensing. Better that the car return to the charity if there isn’t enough income to keep it legal, and there’s no rise in the recipient’s income.

I think we’re onto something here.

Seek's avatar

Actually, it might end up hurting your family member. They’re supposed to report any gifts like that, but if they do report the gift, it counts as income which can get their benefits taken away. So people rarely do report it.

If you claimed it on your taxes and they didn’t report the income, they could be charged with fraud.

Pandora's avatar

I know what you mean. But I would have to agree with @istubro. I always wonder why anyone has to report gifts anyway. If it’s not straight cash, than why should it matter. It’s not like taxes hasn’t been paid on that money on your end already.
But I do believe gifts under 10,000 dollars do not need to be reported. Apparently there is a life time amount they you can give as gifts but not to exceed 10 grand in one shot, in a year it will be deducted from you 5 million amount. I didn’t know there was a 5 million amount for gifts. But it wouldn’t matter. I could never come close. LOL

JLeslie's avatar

@Pandora I was talking about getting a tax write-off. You’re talking about having to pay taxes. It’s a good point though that we actually tax monetary gifts. We even tax gifts like houses.

I’m pretty sure the tax exclusion for gifts is $14k. So, a married couple can actually gift each of their children $28k ($14k each) a year I think tax free.

Also, unrelated, but related, I think the estate tax exemption is going up this coming year to $10million-ish. When it went up to $5million I felt it was too high, now it’s about double. Incredible.

Cruiser's avatar

This link says you can.

LuckyGuy's avatar

@Cruiser The gifts can be given to the recipient tax free. But…(from the link you provided)
“Can Gifts Be Written Off on Tax Returns?
Most gifts are not tax-deductible, but there are at least two exceptions. The first is charitable contributions made to a qualified, tax-exempt organization. These contributions can be deducted only if you file an itemized tax return, and in order to claim a deduction for any donation larger than $250, you must provide records of the gifts in the form of things like receipts and cancelled checks.
In terms of the amount you can deduct from your taxes, cash contributions can be deducted up to 50 percent of your adjusted gross income (AGI), property gifts up to 30 percent, and capital gains assets up to 20 percent of your AGI.

The other exception is for business gifts. You may deduct up to $25 for gifts given to someone for the purpose of rewarding past business or encouraging future business relationships. ”

@ibstubro I am one of 2 directors for a qualified tax exempt organization. It is a prostate cancer support group – like Make a Wish but for guys with a “short time horizon” who are still spending their precious time working to support their families. We are a not-for-profit and spend 100% of funds on programs – Zero for administration.
Everything people donate is tax deductible. However, we can not pass through funds without jeopardizing our status.

By the way, for users of Amazon, smile.amazon.com donates 0.5% of your purchase if you specify the charity. They support us and we are grateful.

(If anyone is interested you can PM me for the name or link.)

Cruiser's avatar

@LuckyGuy I just noticed it did say “tax free” (I have not yet had my coffee) which yes non deductable but the upside is the recipient will not have to pay taxes up to the $13,000 limit.

LuckyGuy's avatar

@Cruiser. That’s ok. It gave me a chance to plug a fine, worthy charity. I know how every dollar is spent. (I consider it a worthwhile cause and you know I don’t spend my money foolishly.)

Cruiser's avatar

@LuckyGuy Thanks for the smile.amazon.com link/tip and I was stunned to see they have over 15 pages of charities that support our veterans alone. Going to be hard to choose just one.

LuckyGuy's avatar

@Cruiser Great! We support guys with prostate cancer. Some are veterans who contracted it while serving.

stanleybmanly's avatar

It would be the end of what is an already unworkable tax system.

jca's avatar

With Amazon Smile, I use a charity that takes care of feral cats. Since “Smile” is a different site than regular Amazon, I have to try to remember to go there for my purchases and not Amazon.

JLeslie's avatar

@Cruiser The giver pays the tax. It’s $14k exemption this year. So, parents with 5 kids can each give each kid $14k tax free. Basically, $28k X 5.

In the original Q I was talking about write-offs, as @LuckyGuy pointed out, to lower taxes, not tax exemptions. The thread kind of bounced around.

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