Whoever said "tis better to give than to receive" must have been a tax accountant. Although we're living in a time when charity must begin at home, it doesn't lower the ever-increasing tax bite. Here are some ways to feel good while saving money too:
First of all, make sure that any gift you make is going to a qualified charitable organization so that your donation is tax-deductible. Search for any charity by logging onto www.IRS.gov and search for 'charities' under the online services heading.
Secondly, get a receipt. For donations of $250 or more, you must receive a written acknowledgement from the donee organization. A cancelled check is not considered as sufficient evidence. However, for cash donations below $250, a cancelled check, account statement or receipt is acceptable documentation.
Gifts of appreciated securities are always a good idea. You can generally deduct the FMV of the security (if held for more than one year), while avoiding capital gains tax. These gifts are limited to 30% of the taxpayer's adjusted gross income per year, with any excess allowed to be carried over and used in the next five years.
Donors over age 70 1/2 can still make a tax-free IRA distribution of up to $100,000 directly to a qualified charity. This provision of the Emergency Economic & Stabilization Act of 2008 has been extended through December 31, 2009. Tax-free treatment is only available for distributions from traditional and Roth IRAs. SEP IRAs, SIMPLE IRAs and employer sponsored retirement plans do not qualify. There are additional restrictions as to the type of donee organizations that qualify.
Donations of non-cash property for which you claim a deduction of more than $5,000 generally require an independent appraisal. Donations of cars, boats or airplanes are usually limited to the gross proceeds from its sale by the charity, unless the value is deemed to be less than $500. Donations of personal and household items must be in "good" condition in order to qualify as a charitable deduction. More information is available on the IRS web-site or you can check out our "Tools" section to find a valuation guide that you can download. You can also find links to the Goodwill and Salvation Army valuation sites under the "Taxes" headline in our "Links" section.
The views expressed represent the opinions of L.K. Benson & Company and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. Please see Additional Disclosures more information.