Making the most of your charitable donations!
During the holiday season, charitable giving is often in full swing. As such, the following are some tips on how you can make the most of your donations.
1. Give appreciated stocks and mutual funds.
Instead of selling appreciated stocks or mutual funds and donating the proceeds, you can avoid the tax bite by donating/transferring them directly to a charity. You avoid the tax hit on the gain while helping the charity.
All donors can avoid the capital-gains tax. However, high-income donors (individuals earning more than $200,000 or couples earning more than $250,000) can also avoid the new 3.8% surtax if the securities were sold.
Don't wait until the last minute, though. Your brokerage firm will likely need several days to complete the transfer, which must be completed before Dec. 31 if you want the deduction on your 2013 tax return.
2. Donate your property.
Contact the local church or Salvation Army store and ask if they know of a child who could use the clothes. Schools might make use of books, paper and art supplies, and local shelters might need extra blankets. You also may be able to donate your airline miles or points to charity. If you itemize on your federal tax return, you can claim a deduction for the donated items. The follow is a link to the guide on Goodwill's website to help you to estimate the value of various items. The link to the guide is located in the middle of the page in a blue box titled Download Our Donation Value Guide at Goodwill.org
If you're able to donate a more significant asset such as land or gold coins, check with your chosen charity first to see if it accepts gifts beyond cash or appreciated securities. You should also consult with your financial advisor and tax professional before proceeding with these type of donations.
3. Give your IRA distribution.
If you're 70½ or older, you can give all or part of your Required Minimum Distribution to a qualified charity. You can make a charitable donation of up to $100,000 per year (cash only, not stocks) from your IRA and not report the IRA distribution as taxable income on your federal tax return.
Most important, you need to clearly communicate your intentions for your charitable contribution to your IRA custodian to make sure the donated money is sent directly to the charity and not to you.
4. Volunteer your time.
If you're strapped for cash, especially around the holidays, volunteer your time. You could deliver meals to the homebound, shovel snow outside your church, or offer to help with the cause's social-media campaign.
In addition to allowing you give back, volunteering will give you a firsthand look at the charity's work and see how you could help more in the future, say by joining its board.
Be sure to check with your human-resources department, as some companies will make a donation to the charity to match your volunteer hours.
5. Use technology.
When you do an Internet search, you can raise money for a cause by using a search engine such as GoodSearch.com. You could also use GoodShop.com to shop at stores such as Target or to get a percentage of what you spend donated to your cause. You could install a giving app such as Charity Miles that allows you to earn money and raise awareness for charities by walking, running or biking. Also, VolunteerMatch helps you find volunteer opportunities from your iPhone or iPad, and with every photo you share through Donate a Photo, donates $1 to a cause you want to help.
6. Think long-term.
Naming your favorite charity as a beneficiary of your IRA is a great way to make a gift. You can easily name a charity as a percentage beneficiary by completing a beneficiary change form and you don't have to rewrite your will or trust.
These days, most donors are smart enough to do at least a little research before firing off a check, but often the focus is on finances—things like the percentage of donations the organization spends on overhead and how that compares with other groups doing similar work.
Before making any significant contributions, take a look at the annual report of any charitable cause to which you want to contribute. In doing so you should pay close attention to the efficiency ratio, which shows the portion of your dollar going to the need relative to sales and administrative expenses. GuideStar (GuideStar.org) keeps financial data on many nonprofit groups, the Better Business Bureau can tell you if the organization is a registered entity, and state agencies, often the attorney general's office, often keep a list of bad actors, he adds.
Charity Navigator (CharityNavigator.org) is another website that lists financial analysis and accountability, lists of groups by topic, names of leadership and other information that may be helpful in assessing the charity.
The intent of making any donation is to help others, but that doesn't mean that you cannot do it an manner that is most beneficial for all involved.