What a Little Giving Can Get You
With the holidays just around the corner, it's time to think about charitable giving--the kind that has a double bottom line.
I'm talking donations that not only help spread holiday cheer to needy families and worthy causes but also help you save money on your personal and business taxes this year.
Here are four tax-savvy giving strategies to consider by Dec. 31:
- Donate your appreciated securities. If you've done well in the stock market this year, you may want to donate stocks that have appreciated in value. The IRS allows you to deduct the stocks' full market value without paying tax on the amount of appreciation, says New York CPA Michael Goldberg, who advises high-net-worth individuals and entrepreneurial businesses on tax planning and compliance.
- Charitable and Wise
The website CharityNavigator.org offers good guidance on how to be a savvy donor. Here are some advice and resources the site offers for giving with both heart and smarts:
Eliminate the middleman. Telemarketing firms take 25 cents to 95 cents of every dollar they collect, according to CharityNavigator.org. If you're interested, hang up, use CharityNavigator to investigate the cause and give directly.
Beware of sound-alikes. Some charity names are strikingly--and not mistakenly--similar to others. Do your homework.
Check the paychecks. The site suggests cross-checking charity leaders' salaries against similar organizations in like regions of the country, and it also offers salary guidelines.
Give the charity a checkup. CharityNavigator.org says the most efficient charities spend at least 75% of their budget on their programs and less than 25% on fundraising and administrative fees. The site provides financial analyses of charities and also recommends asking for a charity's tax Form 990.
- Donate high-value non-cash items. Is there a family heirloom gathering dust in your attic? Now may be a good time to donate it to your alma mater, library or hospital and take that deduction. But take note: The IRS requires you to get the property appraised by a qualified appraiser, and there are special documentation requirements for most donated non-cash property valued at $5,000 or more.
- Roll over your IRA distribution. Planning to retire and don't need the money from your Individual Retirement Account? If you're 70 1/2 or older, you can transfer money through a custodian from your IRA to the charity of your choice. You won't get a deduction on your tax return, but you'll get to make the distribution tax-free. According to Goldberg, this strategy is especially valuable to taxpayers who don't itemize their deductions or whose high income levels result in the phase-out of certain tax benefits.
When you make your gifts, be sure to get a receipt. "A canceled check is no longer valid documentation of donations in excess of $250,"Goldberg says.
Longer term, you may want to consider setting up what's called a family charitable lead trust to provide ongoing support to your favorite charity or college. This allows your heirs to receive the assets at a later time while protecting the value of your gift from estate taxes when you die. You may also want to include your favorite charities in your will.
Whatever you decide to do, don't make these decisions alone. Be sure to consult your tax adviser and/or trusts and estate lawyer for specifics on how to best use these strategies to realize the maximum benefit for you and your family.
Rosalind Resnick is founder and CEO of Axxess Business Consulting, a New York consulting firm that advises startups and small businesses, and author of Getting Rich Without Going Broke: How to Use Luck, Logic and Leverage to Build Your Own Successful Business. She can be reached at firstname.lastname@example.org or through her website, www.abcbizhelp.com
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