Charitable giving is what you should do, but here’s why it also helps with end-of-year tax planning
By ALETHEA PRICE
Is it just me or are November and December the most money throwing months of the year? Between the holidays and charitable giving, my paycheck is being pulled seven ways from Sunday.
The last two months of the year can be very busy for families. Often in the excitement of daily life and holiday planning, many people overlook the importance of year-end tax planning. Planning can help make this go much easier. There are several things you can do to realize some year-end tax-savings. One of the most common ways to reduce your federal tax obligation is through charitable giving.
The winter months are also a perfect time to consider charitable giving. The need is often the highest for organizations, who are either trying to meet year-end budgets or provide additional services during the holiday season. People often give donations in the form of cash or household goods, however, you may also give charitable donations in the form of stocks or even real estate.
The actual amount of tax savings realized through charitable donations will vary for different people, based on their tax bracket. If you make a cash donation, it is always a good idea to write a check; your canceled check provides appropriate documentation of the contribution. If you make a donation of household goods or actual cash to an organization, be certain to get a receipt.
If you donate non-cash items, such as clothing or other household goods, you will need to estimate the fair market value of the items donated. For example, if you donated a bag of clothing to the local thrift store, make a list of all items in the bag, note the condition of the items as excellent, fair or bad, and then estimate the sales price for the items. Be cautious, as this is not the price you paid for the item, but what it will sell for at the thrift store. The thrift store may be able to provide a pricing guide.
If your non-cash donations exceed $500, there will be an additional tax form to complete. If you prepare your own taxes using a computerized software program, you’ll be prompted by most programs to complete the additional form. If you have an accountant or other tax professional prepare your taxes, they will complete it.
Donations of stock or real estate can be slightly more complicated, but are an excellent way to reduce or avoid capital gains taxes while reducing taxable income. Be cautious if you choose to donate a car or boat to charity. Typically the deduction is not the fair-market value of the vehicle, but the amount the charity receives for the sale. If you are considering donating stock, real estate or a vehicle, talk to your accountant or tax professional prior to making the donation.
Find some local charities that you want to donate to. Narrow the list by finding out what organization’s missions you believe in. Give to an organization that’s close to your heart or are passionate about. Every little bit counts.
The Good Giving Challenge is a great way to find local charities who need your help. I encourage you to check out all the opportunities here in Boyle County.
For questions about money management contact me at email@example.com.
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