Savvy Charitable Giving

By Emily Kampeter, Vice President & Wealth Management Advisor

As you’re wrapping up the year, don’t forget about your favorite causes! Most charities need your help to meet their year-end goals, so be generous but be smart with your gift-giving.

Do your research.

Your charitable giving only qualifies for a tax deduction if it goes to a tax-exempt organization as defined by the Internal Revenue Service (IRS). Review how your favorite organization operates and how much of their resources are used for charitable purposes. Charitywatch.org and charitynavigator.org are two great resources to compare non-profits.

Itemize your deductions.

You’ll receive the best tax benefits if your charitable donations (combined with your other itemized deductions) exceed your standard deduction. Of course, don’t make this your sole purpose for giving.

Consider deduction limits.

Your deduction limit is 60% of your adjusted gross income (AGI) for cash gifts and 30% of AGI for non-cash gifts held for more than one year. You can carry over excess contribution amounts for up to five years.

Request a receipt.

If you donate $250 or more, you need a receipt from the charity. If less than $250, you need a bank record/receipt or written communication showing the charity name, date, and amount.

Subtract your benefits.

If you received something in exchange for your donation (e.g., meal, book, etc.), deduct the fair market value of the item or service from your donation.

Get an independent appraisal.

If you want to donate property over $5,000 (e.g. household goods, vehicles, etc.), you’ll want to get an appraisal. Deducting non-cash donations may require you to complete a special tax form (Form 8283 Noncash Charitable Contributions) for those items.

Review your volunteer time.

You can deduct transportation costs and expenses directly associated with your volunteer efforts, but you can’t deduct the cost of your time. Keep your receipts and a mileage log with your tax records.

Donate appreciated investments.

Rather than selling securities (stocks, bonds, mutual funds, etc.) and donating cash, make your donation dollars go further by donating the asset directly to charity. You can get a deduction equal to the fair market value of the asset and avoid the capital gains tax you would have incurred if you sold it. Bonus points if the charity also offers state tax credits for your donation!

Use your IRA.

If you’re age 70½ or older, consider donating to charity directly from your IRA by making a qualified charitable distribution (QCD). If you’re also required to take required minimum distributions (RMDs) from your IRA and you don’t need the additional income, the QCD can also help satisfy your RMD. You can donate up to $100,000, per taxpayer, directly from your IRA and completely avoid income tax on the distribution.

Look to the future.

If it’s not your year to give, think about your future giving capacity. You could make a charitable organization the beneficiary of your life insurance, retirement accounts, or trust. You can even explore trust options that provide income to you during your lifetime and provide the remaining assets to a charity upon your passing. Leaving tax-deferred assets, such as IRAs and retirement accounts, to charity may provide a more tax-efficient legacy versus leaving those assets to heirs in a high tax bracket.

Central Trust Company does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, lega,l or accounting advice. Please consult with your tax advisor before engaging in any transaction.