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by Anne Sedgwick, CPA
'TIS THE SEASON TO GIVE
The holiday season is here, and some of you may have realized that you had a better year than expected. If you want to give a portion of your income to charitable organizations, read on.
If you itemize deductions on your federal income tax return, charitable contributions made to 501(C)C3) organizations are deductible expenses. There are many ways that charitable contributions can benefit both you and the organization.
If you want to make some large year-end donations, there are a couple of gifting opportunities that afford you great tax advantages. If you have capital stock that has gone up in value, has been held for more than one year and would cause you to recognize a large gain on your return ifit was sold, you can use it for charitable giving instead. If stock is given directly to an organization without selling first, take a deduction on your return for the fair market value of the stock on the date of the gift. Since you didn't sell the stock, no gain is recognized on your return. The charitable organization can sell the stock and use the cash for their operations.
A second planning opportunity available only until Dec. 31 exists if you are older than 70 and are required to take minimum distributions from your IRA. Normally, an IRA distribution would be taxable as ordinary income on your return. In 20Il, you can direct your IRA to make a distribution of up to $100,000 directly to a 501(C)C3) organization on your behalf. The distribution will not be considered taxable income on your return and can be used to satisfy your minimum distribution requirement. This is especially beneficial if you are unable to itemize deductions.
If you are making a cash contribution that is less than $250 and you want to deduct the expense, write a check for the contribution so that the cancelled check can be used as documentation. If you are donating a new item that you have purchased, keep a copy of your receipt. Remember when cleaning out your closets that any gently used items donated to charity can also be deducted if you have a receipt. If your gift is $250 or more, you will need to have a receipt from the organization.
Remember, when making your contributions during this holiday season to get a receipt! The IRS will disallow deductions if you don't have proper documentation.
Click here to read the complete article on Blush Magazine's website.
The contents and opinions contained in this article are for informational purposes only. The information is not intended to be a substitute for professional accounting counsel. Always seek the advice of your accountant or other financial planner with any questions you may have regarding your financial goals.
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