Inflation and supply chain challenges have driven up the prices of everything from gas to food. Nevertheless, most of us adjust by reallocating our resources from our wants to our needs.
But for the truly poor, even before the current economy affected things, wants were already eliminated. A tough economy forces the truly poor to choose between and among needs. The questions that arise for the truly poor during tough economic times include wondering how to make one meal of food last for three meals. How to squeeze an extra couple thousand miles out of car tires that are already bald while not risking the safety of kids who ride in that car. How to clothe kids for school with no money whatsoever available for that task. Or, how to tactfully ask whether a bill can be paid in installments over time.
Intertwined in the attempts of the truly poor to navigate a tough economy is a desire to not lose their dignity, because being poor is humiliating, especially for poor parents who know the pain of their children’s poverty humiliation. Thus, the poor in our capitalist society often try to hide their poverty and need for help.
The Bible instructs us to give freely and immediately forget lest we feel a sense of pride in our giving and receive our reward here on earth rather than in heaven. Even for non-Biblical folks, the concept of karma encourages giving.
There is no gift tax for a gift-giver or gift-receiver until the gift-giver has given away over $12 million in the gift-giver’s lifetime. If any one person gives any one other person more than $16,000 in 2022, the gift-giver must tell the IRS, and the amount given will be taken from the $12 million lifetime available total, but there is no tax.
Gifts to organizations that are registered with the IRS as 501(c)(3)-qualified entities can be deductible from income for gift-givers who itemize their taxes or for people who do not itemize their taxes but make gifts directly from certain retirement accounts. Ask your accountant, investment advisor or attorney for details.
If a debt is forgiven, there can sometimes be a tax deduction for the person who forgives the debt. However, if the debt forgiveness is truly a gift, there is no deduction for the gift-giver. Additionally, there are numerous other instances where debt forgiveness is not treated as a possible tax deduction under the Internal Revenue Code.
For those who receive gifts that are in the form of debt forgiveness, the forgiven debt can sometimes, but rarely, be considered income. Thus, there are numerous exceptions to this possibility of having debt forgiveness treated as income. Generally, people who are truly poor are insolvent as a matter of law — they have a negative financial net worth or cannot pay their debts as those debts become due — and are not required to treat forgiven debt as income.
There may not be a more important time than now to give. Please find a charity, and make a difference.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.
