Year-End Charitable Gifting Ideas

If you are looking for additional tax deductions for 2013, giving to charity may fit the bill!

Uncle Sam actually encourages such gifts by allowing you to make gifts in various ways, with some excellent tax benefits for some taxpayers.

The three basis rules for all gifts:

  1. The charity must be qualified by the IRS as a 501(C)3 organization.  Check with the organization before making the gift to see if it qualifies.   You may wish to check at the website.
  2. In order to receive a tax benefit, you must itemize your deductions on your federal tax return.
  3. You must obtain and retain a receipt that acknowledges payment from the organization.  Remember, the IRS requires written evidence of donations.

Ways to contribute:

  1. You may give the charity a check or money order and most will even accept credit cards.
  2. You may donate appreciated assets that you have owned for more than a year.  Stock, mutual funds, or real estate will all work.  The best part is that you will receive a deduction based on the value of the assets at the time of the donation and avoid paying tax on the appreciation.
  3. If you are older than 70½, you can donate money directly out of your IRA.  While you will not get a deduction for this, remember this donation will consist of pretax dollars on which you never paid tax.

The fine print:
As with most tax planning ideas, there are pitfalls that may prevent you from claiming your deduction.  We have already mentioned a couple: i.e., the need to itemize and the need to own appreciated property for a year before it is donated.  There are additional guidelines and we suggest if you are not very familiar with the rules and regulations that you consult with a tax advisor before making the gift.

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