Make the Most of Your Tax Write-Offs for Giving Tuesday
On Giving Tuesday1—the day after Cyber Monday—millions of people across the world focus their attention on giving back. Whether as a way to eke out meaningful legacies or trim your tax bills, end-of-year philanthropy is a good cause and a smart idea. Here are some tips and tricks for managing your deductions and charitable purposes on Giving Tuesday.
Choose Qualified Charities
To get a tax write-off, you must make your donation to a qualified charity: an organization the Internal Revenue Service (IRS) has recognized as tax-exempt. Before you donate, find out if the charity is on the IRS list of qualified organizations and look up that information on the IRS website or ask the charity directly.
Keep Your Receipts
Each time you give a gift, ask for a receipt. The charity should send it to you with your note of thanks. Keep it for your records when you fill out your income tax forms. The receipt should contain the charity’s name, the date you gave, and the specific amount.
Know the Donation Limits
Donations to charitable organizations are only tax-deductible up to a certain amount. Your donations, and what you might deduct, are calculated as a percentage of your Adjusted Gross Income (AGI). If you donate property or other goods, different limits apply than if you donate cash. If you plan to donate, be sure you know what the rules are to manage your donation.
Donate Goods or Services
Don’t forget you may want to donate non-cash items to charity! If you’ve got clothes, toys or furniture you no longer need, donate them to organizations that need them. These donations are also tax-deductible. Remember to keep the receipt, which should be an estimate of the fair market value of the items donated.
Consider Donating Stocks
You may get a big tax write-off by donating stocks: if you own stocks whose value has risen from the time you bought them, donating them to charity avoids a capital gains tax, and you still get the full value for a deduction. You might open a charitable giving trust to keep a stash of stocks available to donate as you wish.
Give Before the End of the Year
If you want to claim a tax deduction this year, you have to make your gift by December 31st. Waiting until January means you won't be able to claim this deduction until you file next year’s taxes.
Consult a Tax Professional
Handled correctly, and with a little help from a tax pro, the unwinding of charitable gifts might be a powerful tool to help prepare for retirement. There are a variety of investment approaches that could help you boost retirement savings while maintaining your commitment to charity. If you’re wondering how to manage your tax deductions this Giving Tuesday, call a tax pro!
This Giving Tuesday, hit the "donate" button with confidence that you’re making your charity dollars go further. Giving feels good, but saving while giving feels even better.
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