As we get closer to the end of the year, now is the time to make last-minute tax strategies. Believe it or not, one of the most commonly used “tax strategies” is making charitable donations. Depending on your tax bracket, you can get a hefty tax deduction for the value of the cash, stock or gift that you make to a qualified charity. You can confirm whether a charity is “qualified” by visiting http://www.give.org or http://www.charitynavigator.org.
For more tips, check out my updated post below and found at http://www.MosaicConsultingOnline.com
How To Have a Scroogeless Holiday–5 Charitable Giving Strategies
So it’s the week after Thanksgiving and the next few weeks will fly by faster than any other time of the year. It seems that as soon as Thanksgiving comes and goes, we all start racing around, finishing up work projects, planning for next year, attending holiday parties, tree-trimming gatherings, department lunches, mailing holiday cards and trudging through the mall for holiday shopping.
And whether it’s for a cause or organization we believe in, or solely for tax purposes, this is also the time when many of us make our first and/or final charitable gifts to charity for the year. Here are five smart charitable giving strategies to keep in mind:
1. Clean out your closets! And your kids’ closets, your spouse’s closets and maybe after you pull the Christmas paraphanalia out of the garage, consider reorganizing that space as well. At this time of year, charitable organizations like Goodwill, the Salvation Army and community shelters need old coats, sweaters, jeans, boots and other items of clothing. Just make sure that when you drop off the bags of gently used shoes and clothes, that you get a receipt from the charity with the name of the organization, a description of the items and rough estimate of their value.
Many of these organizations will also happily accept furnitire and household items, and will sometimes even pick up the items. The same documentation rules above apply to furniture but items over $500 will require an assessment and filing IRS form 8283.
2. Stock-it to them! If you are one of the fortunate few with highly appreciated stock in your portfolio, consider making a gift of that appreciated stock to the charity instead of a gift of cash. In that way, you’ll likely make a larger contribution with stock than with cash and avoid paying capital gains tax if you had sold the stock.
Keep in mind that the deduction you receive is based on the type of asset or gift you transfer to the charity. In general, you can deduct a gift of cash up to 50% of your income. For a gift of property and capital gains asset, you can deduct up to 30% and 20% respectively. Any unused portion of the deduction not taken may be carried over into the following years up to five years.
3. Sometimes cash is king! Although charitable giving is reported to be slightly up for the first nine months of 2011, giving in general is significantly down from prior years and charities are still struggling to stay alive. In many cases, the communities they serve deserately need their services. If you are willing and able, it’s a great time to offer cash to your favorite charity. Most charities accept gifts made in cash, by check, credit card or wire transfer. Just be sure to get a receipt from the charity for the cash, or keep your credit card statement, bank record or other receipt as documentation.
4. If you haven’t already, now is the time to make a charitable donation to the Sandy relief efforts. Even though it’s already been 4 weeks since the storm hit the Northeast, many communities in NY and NJ are still suffering and in desperate need of support. Are you short on cash but rich with personal and sick days at work? The IRS and Treasury recently released guidelines that allow employees to give up paid leave to make a cash donation to a favorite charity. The employee does not receive a charitable deduction, but the value won’t be included as taxable income either.
5. Time is money but it’s not a write-off! It’s cool to volunteer but remember that you can’t claim your time as a charitable gift. However, you can deduct all your out-of-pocket expenses, including clothes, mileage, meals and other expenses incurred while volunteering. So although you can’t claim the time you spent building homes for Habitat for Humanity, you can deduct your cool work outfit and supplies. Just make sure you kept your receipts.
Especially in tough economic times, many people might find it more difficult to give to charities. But charitable giving offers significant tax benefits and it’s a great way to support your community. Using some of all of the above strategies, gifting doesn’t have to hurt your wallet either!