William, a high school teacher, earns about $50,000 each year. In December 2017,

Question

William, a high school teacher, earns about $50,000 each year. In December 2017, he won $1 million in the state lottery. William plans to donate $100,000 to his church. He has asked you, his tax adviser, whether he should donate the $100,000 in 2017 or 2018. Identify the tax issues related to William’s decision. William, a high school teacher, earns about $50,000 each year. In December 2017, he won $1 million in the state lottery. William plans to donate $100,000 to his church. He has asked you, his tax adviser, whether he should donate the $100,000 in 2017 or 2018. Identify the tax issues related to William’s decision.

Explanation / Answer

William should donate the $100,000 in the year 2017, when he receives the $1 million won in the state lottery.

Deductions for donations to a qualified public charity (his church) are limited to 50%
of adjusted gross income (AGI).

Deductible As Charitable Contributions: Money or property you give to:

His AGI in the year of receipt of the lottery winnings would be very high, to claim the contribution as a deduction in that year.

However, if he decides to donate $100,000 in tax year 2018, his deduction will be limited to $25,000 (50% × $50,000).

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