Taxes and Holiday Gift Giving

Article Highlights:

Watch Out for Holiday Gift Scams
Gifts with Tax Benefits
Gift of College Tuition
Gift of College Student’s Supplies
Payoff of Student Loan Debt
Clean Car Credit
Qualified Tuition Programs
Qualified Charitable Distribution
Donor-Advised Funds
Work Equipment
Employee Gifts
Monetary Gifts to Individuals
Documentation
Timing

The holiday season is customarily a time of giving gifts, whether to your favorite charity, family members or others. Some gifts have tax implications and can even provide a variety of tax benefits.

But be wary; during the holiday season, you may receive phone calls, texts, emails, snail mail, or appeals on social networking sites for donations for various causes. However, some of these appeals may come from fraudsters and not legitimate charities. Unfortunately, this happens every holiday season.

So, before writing a check or giving your credit card number to a charity that you aren’t familiar with, check them out so you can be assured that your donation will end up in the right hands. Follow these tips to make sure that your charitable contribution actually goes to the cause you are supporting:

Donate to charities that you know and trust. Be alert for charities that seem to have sprung up overnight and that you are not familiar with.
Ask if a caller is a paid fundraiser, who they work for, and what percentage of your donation goes to the charity and fundraiser. If you don’t get clear answers—or if you don’t like the answers you get—consider donating to a different organization.
Don’t give out personal or financial information, such as your credit card or bank account number, unless you are sure that the charity is reputable.
Never send cash or a gift card. You can’t be sure that the organization will receive your donation, and you won’t have a record for tax purposes.
Never wire money to someone who claims to be from a charity. Scammers often request donations to be wired because wiring money is like sending cash: Once you send it, you can’t get it back.
If a donation request comes from a charity that claims to help a local community group (for example, police or firefighters), ask members of that group if they have heard of the charity and if it is actually providing financial support.
Check out the charity’s reputation online using Charity Watch or other online watchdogs.

Gifts with Tax Benefits

A Gift of College Tuition – An interesting quirk in the gift tax laws is that an individual can pay a student’s higher-education tuition directly to a qualified school, college, or university, and it will be exempt from gift tax and gift tax reporting. What student wouldn’t love to have part of their tuition paid? It would make a great gift. However, the giver isn’t allowed a charitable deduction on their income tax return for the tuition they generously paid.

As an aside, college tuition generally qualifie