If Tax Reform passes, there is a very good chance that 2017 will be the last year Badger fans can take a tax deduction for a portion of their ticket purchase that includes a contribution towards the University of Wisconsin Foundation. Currently, 80% of the amount a donor pays in order to purchase preferred seating at UW game tickets is deductible for income tax purposes, according to IRS Code Section 170 (I). Proposed tax legislation currently in Congress would eliminate that tax deduction.
UW Athletics has reached out to its current season ticket holders reminding them that the 80% portion that qualifies for a charitable tax deduction may be history after December 31, 2017. To encourage year-end tax planning, the donors can choose to prepay the 2018 portion now and get the tax deduction before the law changes.
Substantial tax savings
As tax advisors we think this is good tax planning. As long as the taxpayer is able to itemize its deductions in 2017, prepaying charitable deductions is an easy way to generate additional tax benefits. If the individual is in the 30% federal + state tax bracket, a $5,200 payment for a priority seat cost would generate an allowable 80% charitable deduction of $4,160 and that is $1,560 in tax savings!
If this legislation passes, preferred seat donations would still be required for football/basketball/hockey season ticket holders in preferred seating areas; payments after December 31, 2017 would NOT be deductible. Individuals would still be required to retain support for the “2017 tax donation” so make sure you track down a tax acknowledgement letter from the University of Wisconsin Foundation.
[For non-Wisconsin fans/alumni, substitute your favorite university’s name – the rules are the same.]