It’s often said that the holidays are the perfect time of year for giving. That’s true, but charitable giving is a rewarding and beneficial endeavor any time of the year. It benefits those around you, and for physicians, it places a positive light on their medical practice.
“[Charitable giving is] an opportunity for physicians to meet other members of the community,” says California-based CPA Raffaele Mari
. “Giving back to the community can translate into a practice benefit by generating new clients. That’s really the prime benefit.”
Mari and his CPA colleagues suggest adhering to specific steps and guidelines when considering charitable giving.
First and foremost, it’s important to remember that you can only deduct contributions made to qualified organizations. Churches, synagogues, temples and mosques automatically qualify, but almost all other organizations must apply to the IRS. An organization should be able to tell you if it’s qualified, but to be certain, you can check IRS Publication 78, Cumulative List of Organizations Described in Section 170(c) of the Internal Revenue Code of 1986, available online at www.irs.gov
Next, in order to deduct a charitable contribution, you’ll need to file IRS Form 1040 and itemize your deductions on Schedule A. However, if your allowable charitable deduction plus all your other itemized deductions doesn’t add up to more than your standard deduction—$11,400 for married couples filing a joint return for 2009—you generally won’t realize a tax benefit from the charitable contributions you’ve made. In addition, says Mari, “charitable contributions cannot be more than fifty percent of your adjusted gross income. Most of the time that’s not a problem, but you need to be aware of that.”
Above all else, make certain to keep records that document the contributions you make. For cash contributions, you’ll need a bank record, such as a canceled check or credit card statement, or a receipt from the organization that includes the organization’s name, date and amount of the contribution. Cash contributions of $250 or more require a written acknowledgement from the organization outlining the value of the contribution. For non-cash contributions, the specific documentation required depends on the amount of the deduction. And if the charitable contributions you’re making are on your own outside of the medical practice, Mari says that “it definitely pays to keep any recordkeeping related to your charitable time or contributions separate” from the practice. That’s why it’s important to work closely with a CPA.
What physicians are doing
Mari explains that among the charitable opportunities for physicians is providing pro bono services to the less fortunate at an area clinic, or sitting on the board of a local hospital and participating in fundraising events. However, physicians are not allowed to deduct the fair market value of the time they spend volunteering. But, you are allowed to deduct unreimbursed amounts that are directly connected to the services you provide, such as out-of-pocket expenses for parking and tolls, or the mileage driven to and from the location where they’re you’re volunteering.
“From a tax benefit standpoint, because physicians are in a high tax bracket, I see them doing a combination of both cash contributions as well as property contributions, where they donate clothing or vehicles and receive a tax benefit,” Mari explains. “Most physicians, especially if they’re in their own group, usually have a goal within their organization to give back to the community in some way. It spreads goodwill, and makes them more recognized within the community.”
With any charitable contribution, it’s a good idea to stop and ask yourself if you’re receiving a benefit as a result of your action. Generally, if you make a contribution and receive a benefit, you can only deduct the amount that’s more than the value of the benefit you receive. So, according to the California Society of CPAs
, if you pay $200 at a charity auction for a weekend getaway that has a fair market value of $150, your deductible charitable contribution is $50. You can, however, deduct your entire payment to a qualifying organization if you receive only a token item or benefit in return, and the organization informs you that the value is not substantial and tells you that you can deduct the full amount of your payment.
Overall, Mari believes the benefits from charitable work can be substantial, both personally and professionally. “Most of my physician clients have family practices, and sometimes, through the course of their charitable work, they’ll come in contact with other professionals who are also donating their time,” he explains. “As a result, it becomes a very good opportunity for networking.”