Lower Your Tax Liabilities and Make a Positive Impact on the Community Through Charitable Donations
By: Mary Bube
What is Charitable Giving?
Charitable giving is the donation of money or property to a qualified Tax-Exempt Organization while the
donor does not receive anything in return for the contribution. In general, the total amount of giving
that will be allowed as a deduction is 60% of your annual adjusted gross income for monetary donations
and 30% for long-term appreciated assets.
What are some types of qualifying donations that can decrease your tax liability?
The most recognizable charitable donations are monetary; cash, checks, credit cards, and digital currency
are all widely accepted by most charities. Be sure to keep documentation of your donations regardless
of the amount. Bank Statements, Credit Card Statements, and Receipts from the receiving organization
will suffice.
Non-cash donations can also qualify as a tax deduction. An estimated value of the items donated will be
used in calculating your deduction. The receiving charity will be able to give you a receipt for the total
value of the items received. If your donations are at least $500.00 in value, Form 8283 will need to be
completed when filing your annual taxes.
Volunteering can be another form of giving that can count towards your tax deductions. While the IRS
does not allow your time or services to be deducted, the expenses related to volunteering are
acceptable, such as transportation costs incurred to drive to the charitable site.
Other accepted donations that can be claimed on your taxes are long-term securities, real estate,
private company stock and other investments to lower your tax liability. With long-term appreciated
assets donated to a qualifying charity, the capital gains taxes are eliminated allowing the donor to claim
immediate income tax deductions on the fair market value and potentially minimize capital gains on the
appreciation.
Retirement Planning?
If you find yourself in a higher tax bracket now than after retirement, making larger contributions now
can give the possibility of tax savings on your current tax returns.
Has your current year income increased from a bonus, an inheritance, or the sale of property?
The benefits of charitable contributions can be carried for up to five years. The annual maximum
deduction limits still apply (60% Adjusted Gross Income for cash contributions and 30% for long-term
appreciated assets) and the remaining contributions to the charity can be carried forward for up to five
years. So, if your income has increased for one year from things such as a bonus, an inheritance, the sale
of property, or another, it could be to your advantage to increase your charitable donations for the year
and reap the rewards for up to five years.
Charitable Giving benefits the donor, the charitable organizations, and the community as a whole. A
positive impact for all.
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