Celebrities Amber Heard and Johnny Depp recently settled their divorce, and Heard received a $7 million settlement. She subsequently donated all of that to charity—half to the American Civil Liberties Union and half to the Children’s Hospital of Los Angeles. She specified that the money for the ACLU should go toward preventing violence against women. Considering she sought the divorce because of emotional and physical violence against her perpetuated by Depp, this seems like an obvious choice.
Those two organizations will no doubt be able to do a lot of good with the $3.5 million influx they both just received, and it’s great to see somebody donate that kind of money. Heard could have easily kept it for herself, and nobody could really look askance at such a decision. But her donation could, as Forbes points out, result in some complicated tax issues for her.
The article in question lays out the specifics of the tax policy, which is much too complicated to get into here, but suffice to say she could end up getting hit with a significant bill come tax time, depending on how that money was received.
Hopefully, for her sake, Heard’s lawyer managed to get that settlement in such a manner that she won’t have to pay taxes on it. Otherwise, despite not having any of the money, she may actually have to pay taxes on the entire $7 million. The other option is that she might not be able to deduct much of it, which likely isn’t a big concern for her, as she is a well paid (by the average American’s standards) actress herself.
But there is an important lesson here for people wishing to make large donations. If you’re planning on giving a big donation, check with an accountant first to make sure that you can deliver that donation in a way which doesn’t come back to bite you.
Charity should be lauded, not punished because of the intricacies of tax law.