As the 2018 calendar draws to a close, thoughts of charitable giving may be on your mind. With recent tax law changes enacted under the Tax Cut & Jobs Act, itemizing deductions - which includes charitable contributions - on individual tax returns, may be superseded by a much higher Standard Deduction afforded to taxpayers ($24,000 for a Married Filing Jointly couple and $12,000 for a Single taxpayer).
Consequently, for many of us involved in farming, charitable giving in the form of “gifting grain” may become more appealing than a cash donation. In case you are unfamiliar with gifting grain, here is what you need to know as a “cash basis” farmer looking to make a charitable gift before year end:
The potential tax savings for a farmer who gifts grain includes the following:
No charitable deduction is reported by the taxpayer, so the married farmer who has less than $24,000 of Itemized Deductions (i.e. medical expenses (on a limited basis), state and local taxes, charitable giving, and mortgage interest on a house), can take advantage of the $24,000 Standard Deduction along with the reduced farm income from gifting the grain.
Joe and Jane Farmer typically donate $10,000 to their hometown church each year. Instead of donating cash in 2018, they chose to gift 1,250 bushels of soybeans when the market price was $8.00 per bushel. Assuming the Farmers have not exceeded the maximum self-employment tax limit, their potential tax savings could be ~$5,600 (37% federal savings, 5.7% Kansas savings and 15.3% self-employment tax savings). If they had simply gifted cash, their savings would have only been $3,700 (if they were able to Itemize Deductions).
As always, please consult with your tax accountant or CPA who can advise you as it relates to your own personal tax situation.
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Julie Spiegel, CPA, Owner
Varney & Associates, CPAs, LLC
Manhattan, KS
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