What Are the Date of Gift Rules for Charitable Contributions?

The timing of a charitable contribution determines the tax year in which a deduction can be claimed. For a donation to be deductible, it must be considered a “completed gift” within the tax year. This concept hinges on the moment a donor irrevocably gives up control over an asset, transferring it to a qualified charitable organization. The specific action that finalizes this transfer varies considerably depending on the type of asset being donated and the method used for its delivery.

A gift made on December 31st might be deductible for that year, while one initiated on the same day but completed on January 1st of the next year would fall into the subsequent tax period. The rules established by the Internal Revenue Service (IRS) provide a clear framework for identifying this precise moment of completion for various types of contributions.

Determining the Date for Common Donation Methods

For a cash donation delivered in person, the gift date is simply the day the charity physically receives the money. This straightforward rule provides clear finality, as the transfer of control is immediate and unambiguous.

When donating by check, the gift date depends on the delivery method. If mailed through the United States Postal Service, the “mailbox rule” applies, making the postmark date the date of the gift, as detailed in Treasury Regulation 1.170A-1. This rule does not extend to private delivery services. For a check sent via a carrier like FedEx or UPS, the gift date is the day the charity receives it. In all cases, the donation is only complete if the check is honored by the bank upon presentation, and if a check is post-dated, the gift is not complete until that date arrives.

Donations made via credit card are considered complete on the date the charge is processed and posted to the cardholder’s account. This is the moment the donor becomes indebted to the credit card company, and the funds are committed to the charity. The date the donor later pays their credit card bill is not relevant for determining the timing of the tax deduction.

For electronic funds transfers (EFT) and automatic payroll deductions, the date of the gift is the date the funds are debited from the donor’s bank account. In the case of a payroll deduction, the gift is complete on the date the amount is withheld from an employee’s paycheck. The date the employer actually transmits the collective funds to the charity does not affect the timing for the individual donor.

Timing Rules for Donating Securities

The rules for pinpointing the gift date for securities like stocks and bonds depend on the form in which they are held and transferred. When a donor holds physical stock certificates, the donation is complete on the date the properly endorsed certificate is physically delivered to the charity or its designated agent. This act signifies the transfer of ownership and control.

If the donor mails a physical stock certificate, the same mailbox rule that applies to checks is used. The date of the gift is the postmark date on the envelope, provided the certificate is received by the charity in due course. To ensure security, it is a common practice to mail the unendorsed stock certificate in one envelope and a signed stock power, which authorizes the transfer, in a separate envelope.

For securities held electronically in a brokerage account, often referred to as being held in “street name,” the process is different. The gift is not complete when the donor instructs their broker to make the transfer. Instead, the gift date is the day the stock is officially transferred from the donor’s account to the charity’s account on the books of the corporation or its transfer agent. This process can take several days, a detail that is important for donors making year-end contributions, as a delay by the brokerage firm could shift the deduction into the next tax year.

Establishing the Date for Property Donations

For real estate, the gift date is determined by when the transfer of ownership is considered complete under state law. In many cases, this occurs when a properly prepared and executed deed is delivered to the qualified organization. However, some states require the deed to be recorded to finalize the transfer, making the recording date the actual date of the gift.

For tangible personal property, such as artwork, vehicles, or collectibles, the gift is complete on the date the charity obtains full “dominion and control” over the item. This legal concept means the donor has given up all rights and ability to influence or command the property. This is the point at which the charity has physical possession of the item and can use or sell it without further permission from the donor.

Transactions Not Considered Completed Gifts

Certain transactions and commitments, while made with charitable intent, do not qualify as completed gifts for tax deduction purposes. A common example is a simple pledge or promise to make a donation in the future. The tax deduction can only be taken in the year the pledge is fulfilled through an actual payment or transfer of property.

The value of personal services or time contributed to a charitable organization is not deductible. While the out-of-pocket expenses incurred while volunteering, such as the cost of gas and oil, may be deductible, the value of the labor itself is considered a contribution of service, not property.

Allowing a charity to use a donor’s property for a period does not constitute a completed gift of the property’s value. For instance, if a donor permits a charity to use their vacation home for a fundraising auction or provides rent-free office space, they cannot claim a deduction for the fair rental value. This is considered a contribution of a partial interest in the property, which is generally not deductible.