written by Mark Lamb
Any time is the right time when it comes to charitable giving, but the end of the year is an especially good time to combine giving with tax planning.
The key to reducing your taxes is reducing your taxable income. Donating a portion of your money to charity can help achieve the dual benefit of helping others and helping you work toward a lower taxable income. Here are some strategies to consider to help make the most of your giving this year.
Write a check instead of giving cash.
Cash gifts without an accompanying receipt cannot be deducted. However, for gifts of $250 and under the cancelled check will suffice for a receipt.
Another way to increase your value of your charitable contribution is by using a credit card with points instead of writing a check. Not only is the tax benefit gained, but the points you earn can be used for something you enjoy.
Donate appreciated stock/securities to charity.
Most publically traded securities can be donated to charity without the donor having to sell them first. When securities are donated, the donor can claim the fair market value as an itemized deduction. Plus, no capital gains taxes are owed because the securities were donated, not sold. The greater the appreciation of the stock, the greater the tax savings will be.
Donating inherited investments with unknown or low-cost basis is another facet of this idea. This saves the donor from having to establish the basis in the stock upon sale, since the donor is donating the stock rather than selling it.
Another item to consider is the donation of real estate. From a tax standpoint, the donation of real estate works like the donation of stock although documentation by an appraisal is recommended.
Make a direct transfer from your IRA to a qualifying charity.
If you are taking minimum IRA distributions, transferring directly to charity is a good way to keep your income lowered – which impacts other taxes and phase outs. The transfer must go directly from the IRA and not pass through your personal accounts.
Use state credits in MO and KS to leverage charitable giving.
Both states offer tax credits that enhance the face value of a regular donation. If you have a favorite charity, ask them if they offer tax credits for your state.
As with any tax planning each case is unique. Donors should consult with their financial advisor and tax professional, and possibly the nonprofit organization, to ensure an appropriate plan is considered. Contact us if you have any questions 417-881-0145.