Article Written by Wayne Johnson, CFP||special174||, AEP||special174||, MBA from Syverson Strege and Company
Gift of Grain
Share the Harvest – More Effectively
In Iowa, November marks the conclusion of the harvest and the beginning of our preparation for the end of the year. These preparations often include making charitable gifts in recognition of the holidays and end of year tax planning. Why not combine all three activities?
An often overlooked tax efficient charitable strategy is the contribution of grain to your charity of choice. Such a contribution is not reported as a charitable deduction on your income taxes. The value of the contributed grain is simply avoided income, while production costs of the commodity are still deducted. Avoiding taxable income provides several advantages to you, the donor. First, the avoided income does not incur Self Employment Tax. Second, the avoided income more effectively reduces Taxable Income if the donor utilizes the Standard Deduction or if they are subject to phased out Itemized Deductions. And finally, the avoided income does not count against the 50% of Adjusted Gross Income limit for itemized charitable deductions.
Making such a gift only requires that the donor file a Schedule F with their Federal Income Tax Return. The gift is made by notifying the charity of choice that the donor intends to make a contribution of grain. This allows the charity to establish an account at the grain elevator. The grain is then delivered to the elevator. The elevator will direct the specified portion of the load to the charity’s account. The charity then takes responsibility for the eventual sale of the grain. The charity should also provide the donor with a receipt for the gift and a settlement report to support yield reports.
While making a donation of grain may not be as simple as writing a check, it is clear that in certain instances such a contribution can be an effective way to manage taxes and support worthy charities. We encourage you to contact your tax advisor to see if such a strategy is right for you.
For more information or if you have any questions, please contact Syverson Strege and Company at (515) 225-6000.