As we head toward the holidays and the end of the year, charitable giving goals come into focus for many people. While altruism should be the primary motivation for giving, we also believe that taking advantage of certain tax laws helps one to be a more efficient giver, or better steward. Here are a few things to remember as you make year-end charitable plans:
- A gift to a qualified charitable organization may entitle you to a charitable contribution deduction if you itemize on your tax return. For example, if you are in the 28% marginal tax bracket, the actual “cost” of a $1,000 donation will be $720.
- Contributions are deductible in the year they are paid. Sending a check in the mail constitutes payment. A contribution made on a credit card is deductible in the year it is charged to the card.
- If you donate highly-appreciated stock that has been held for at least one year, you can receive a deduction equal to the fair market value of the asset. Giving appreciated stock also reduces your future expected capital gains tax.
- Consider a Qualified Charitable Distributions (QCD). If you are over 70 and required by law to take annual distributions from your IRA, you can donate the RMD and avoid declaring that money as income on your tax return.
- Transportation costs. You can deduct transportation costs if you use your vehicle for volunteer activities. However, you may not deduct the cost of your time.
- Remember to document. Always get a receipt or gift letter from the charitable organization and keep it in your tax folder.
For singles making over $250,000, and for married couples making over $300,000, most itemized deductions, including charitable deductions, are reduced (up to a maximum reduction of 80%). Also, for more sophisticated giving strategies (charitable remainder trusts, donor advised funds, and private foundations), contact us for a comprehensive consultation.