There are many ways to support the charitable organizations that are important to you. Goods, monetary donations, and the most limited resource of all (YOUR TIME) are all generally accepted and appreciated throughout the year. Are there ways that you can donate to your favorite organizations and get a tax benefit as well? Let’s find out.
- Cash is the easiest way to donate to a charity. Send a donation through the website, a check through the mail, or even text from your phone. Donating cash is simple and you get a tax deduction for your donation if you itemize.
- Donating appreciated stock (or mutual fund or ETF) is an even better strategy than simply giving cash. Why? Well, you get a similar tax deduction benefit AND you avoid having to pay tax on the growth of the stock price! And if you really like the stock, you can always buy more shares using the cash that you would have donated to charity in the first place.
- “Wow donating stock sounds great, but I don’t donate enough to one charity to make it worth my time.” This is a where a Donor Advised Fund comes in handy. You can make one stock donation to a Donor Advised Fund and make several “grants” to the charities of your choice. Less tax paperwork and more fun finding charities and giving. This is also a great tool for accelerating tax deductions into the current year and granting funds to charities in future years. For more information, check out Schwab Charitable or Vanguard Charitable.
- If you are over 70 1/2 and have an IRA, a Qualified Charitable Distribution (QCD) may be the best donation strategy for you. The QCD counts towards your required minimum distribution (RMD) and does not count as income on your tax return! Since it does not count as income, you do not get a tax deduction – no double dipping. The QCD could be a nice benefit for taxpayers who are subject to the new Medicare surtax, do not have enough deductions to itemize, or have to carry forward other charitable deductions. 2013 will be the last year this strategy is available unless Congress decides to extend it.
These are four great ways to make a positive impact for charities and only four weeks left to make tax deductible gifts for the year. Be sure to check with your advisor to see which one is the best of your situation