'Tis the season: tips for year-end charitable giving
Oct 10, 2011
As another year comes to an end, Americans ― the most generous people in the world ― are sitting down to make decisions to give back to their communities by making year-end charitable contributions. This generous spirit is holding true in spite of a depressed economy.
The simplest method of giving is to write a check to your favorite qualified charity. The IRS requires proof of your donation in order to take a deduction. If you give less than $250, keep your cancelled check for your records. If you give more than $250, a written confirmation from the charity is required.
However, maybe you should stop and consider ways to make that gift work even harder for you. In these difficult economic times, it is more important than ever to take advantage of every opportunity available to you. Let’s take a look at some strategies that can help your contributions work harder for you.
A second method for giving ― one that will get some extra bang for your contribution buck ― is to make a gift of publicly-traded stocks that you own. If you give away stock owned more than one year, you get a deduction equal to the full fair market value of the stock based upon the value on the date of the gift. By gifting the stock directly to charity, you do not have to pay taxes on the increase in the value of the stock prior to the gift. Many charities will provide you instructions on how to transfer the stock directly to their account. Do not sell the stock before you make the gift. Instead, make sure you give the stock itself to charity.
Unfortunately, many of us own stocks that have gone down in value. If that is the case, the planning is the exact opposite. You should sell that loser stock yourself before the end of the year and then use the proceeds to make your charitable contribution. Losses on sales of stock are deductible up to $3,000 and can also offset other gains you might have. It does not matter how long you have held the stock in this case.
Other more complex charitable tax savings ideas to consider include making a gift of a life insurance policy that you no longer wish to keep, setting up a charitable trust to facilitate your longer term charitable plans, or considering a charitable annuity to realize a higher cash return than you currently earn on CDs and money market funds. Contact us to explore these options more fully.
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