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Tax
Time Thoughts
on Giving Opportunities
Written
By: Attorney Jeffrey
A. Marshall
CELA*
Originally
published in the First Community Foundation's Newsletter (March 2006)
Tax filing season is here again.
This is a time of year when many of us are thinking about tax
deductions (and wishing we had more of them). It is a particularly
appropriate time to start thinking about and planning our charitable
deductions for next year.
Most
likely you are already making gifts to one or more of your favorite
charities. Gifts to charity provide an opportunity for you to receive
valuable income and death tax deductions.
Of course, tax deductions are not the
foremost reason people make charitable gifts. We give for spiritual
reasons, and to help others in need, to create a better place to live, a
stronger community, a better world. But tax deductions can help us afford
to give more. We can maximize
our gifts by taking full advantage of the tax benefits that are available
to us as a result of generosity.
If
you itemize and intend to seek a charitable deduction next year, here are
a few ideas to keep in mind.
√
To be deductible, your contribution must go to a qualified charity.
For a searchable list of qualified charities, visit the IRS website
at http://apps.irs.gov/app/pub78.
Remember that churches, synagogues, mosques and temples, are not required
to apply to the IRS to be qualified as charities, so you can deduct your
contributions to such organizations even though they do not appear on the
IRS list.
√
Make cash donations via check or credit card, so that you have a
good record of your contribution.
√
Additional documentation may be required for some donations.
Contributions in excess of $250 require a letter from the charity
acknowledging the gift and confirming that it wasn't made in exchange for
something valuable. If you're
making a donation of $75 or more and do
receive something of value from the charity, such as a meal, obtain
a letter indicating how much you donated and the value of what you
received in return. You will only be able to deduct the difference between
the amount of your gift and what you received in return. If you're
donating property worth more than $5,000, you need to have it appraised.
√
If you own a stock or mutual fund that has increased in value,
think about donating some of it instead of cash.
The gift of appreciated stock generally offers a twofold tax
savings: (1) you avoid paying capital gains tax that you would pay if you
sold the stock and, (2) you can deduct the full fair market value of the
stock at the time of the gift. (If
you own a stock that has declined in value, it generally makes more sense
to sell it and give the proceeds to the charity.)
√
Keep a journal of out-of-pocket expenses for charitable work such
as: mileage, parking fees, tolls, bus or taxi fares. Record the name of
the charity, the date of the expense and the amount.
√
Make sure that you retain the receipts and other required
documentation related to your charitable contributions for at least three
years.
√
Charitable gifts can be made in creative ways that can also help
you maintain your financial security and reach your financial goals, such
as providing steady retirement income.
Talk with the charity, your lawyer and accountant about charitable
annuities and trusts that can supply you with income for the rest of your
life and provide a tax deduction.
√
Think outside the box. The
are many ways to contribute other than cash and stocks. Gifts can be made
of life insurance, collectibles, through IRA beneficiary designations, and
remainder interests in your residence or farm.
√
Remember charities in your will.
Charitable bequests will not be subject to
Pennsylvania
inheritance tax or Federal estate tax.
But, better yet, don't wait.
If you make a charitable gift during your lifetime, you can reduce
death taxes AND you can get an income tax deduction as well.
√
Make sure the charity is legitimate and worthy of your
contribution. How much of the
charity's funds go to its charitable purpose as opposed to executive
salaries, fund raising, and other administrative expenses? This may
require you to do some research. Fortunately,
a number of organizations rate charities use of donated funds.
Visit the Charity Navigator website
http://www.charitynavigator.org/http://www.charitynavigator.org.which
is free. Or check with the American Institute of Philanthropy
(773)-529-2300 or http://www.charitywatch.org/
√
Finally, be wary of phone solicitations. Never give personal
information to organizations you don't know-especially over the phone.
Jeff Marshall is
Certified as an Elder Law Attorney by the National Elder Law Foundation
and is the author of Elder Law in Pennsylvania. He is the managing
attorney of the Elder Law Firm of Marshall, Parker & Associates' with offices
in
Jersey
Shore
, Williamsport,
Wilkes-Barre
& Scranton. He can be contacted at webmail@paelderlaw.com.
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