Getting the Most Out of Charitable Donations
As we quickly approach the year-end and think about making gifts to charity, it is important to understand the tax efficient ways to make your donation. First, you will only be able to write off charitable contributions if you will itemize your 2014 federal tax return. Second, you generally cannot deduct more than fifty percent of your adjusted gross income for cash contributions or above thirty percent for donations of appreciated property to public charities. Lastly, for any cash or non-cash donation over $250, you need to have the charity’s acknowledgment of the gift before filing your tax return. Provided below are tips on how to get the most out of charitable donations:
- Appreciated Securities. By donating significantly appreciated publicly traded stock you have held over a year, you can deduct the fair market value of the stock and will not owe taxes on any appreciation.
- Clothes and Household Goods. When you make these donations to a thrift store, the IRS often lets you claim a deduction for the amount you would get by selling them.
- Art. If you donate artwork that the group will auction off or sell, your deduction will be limited to your cost. However, if the organization uses the art for its tax-exempt purpose, you can claim a donation for its fair market value.
- Contributions from IRA Accounts. The IRS allows people 70 ½ and older to make charitable contributions of up to $100,000 directly from their IRA and have them count toward their required minimum distributions. This tax break was renewed for 2014.
See David Levi, 5 Smart Tax-Savers For Year-End Charitable Giving, Forbes, Dec. 23, 2014.