The ALS ice bucket challenge has been wildly successful, raising $100 million in one month. Will donors get a tax deduction? Tax attorney Rob Wood discusses the subject in this report and in his Forbes article “$100 Million Later, The Ice Bucket Challenge May Not Lower Your Taxes After All.”
Wood notes at the outset that the donations should be deductible; “The question is, is it going to reduce your tax bill.” The caveat Wood raises is that a donation will be tax deductible if it was given with a charitable intent and not deductible if it was given just to avoid a bucket of ice water. There are a lot of tax law cases about the deductibility of a donation, and they all involve charitable intent. It is important to keep good records as to all donations a taxpayer wants to claim as charitable.
Wood also points out that the amount of a charitable deduction is sometimes reduced by the value of something a taxpayer gets in return for the donation. Wood uses the example of a $500 ticket to a charity dinner where the taxpayer gets a meal worth $100. The deductible amount is $400.
Wood opines that some charities have been known to bend the rules to encourage donations. “Many of us don’t want to know what the rules are,” Wood suggests. All kinds of promotions are designed to get people excited and encouraged to take part in the charitable fundraising effort. For example, at a charitable auction, you buy a trip to Europe valued at $10,000 for $12,000, you have made a $2,000 charitable donation. On the other hand, if you take part in a charitable golf tournament, hit a hole in one, and win a new car, you will owe taxes on the car (“the Oprah rule,” as Wood puts it).
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.