Hurricanes, floods, wildfires, and more. All of it has many of us wondering how we can help. Charitable donations are a great way to give back. And with the year-end coming, it’s a good time to consider potential 2017 tax savings. Before you do anything, check out these 8 tips before you donate. For more on the subject of charitable giving tips, you can also check out this article by Inc.com:
1.) Choose wisely.
Find a cause you feel good about. And if you’d like to get potential tax savings, make sure the charity is eligible for deductible contributions. See the IRS database here for verification. And remember: churches, synagogues, mosques, and temples are eligible even if they aren’t listed in the database.
And to make sure that your charitable donations are doing the most good, you may want to check out how much of your donation is actually going to the charity’s purpose versus paying for administration, marketing, and big salaries. You can start by checking out GuideStar.org and CharityNavigator.org for their rankings and scores.
2.) Keep good records.
Whether you’re donating cash, clothing, or household items, always get a receipt! Money donations require bank or credit card statements with the charity’s name, the donation date, and amount given. Property donations require written descriptions and fair market values. Donations by check need to be mailed by December 31st. Credit card purchases are eligible even if the bill isn’t paid until 2018.
3.) Volunteering counts.
Do you help out at charitable events? You can’t deduct your time, but you can deduct out-of-pocket volunteer expenses as long as they were not personal or reimbursed. Transportation costs (mileage @14¢ per mile, parking, tolls), supplies, and uniforms can all be deducted.
4.) You must itemize.
Only itemizers can claim charitable contributions as deductions. Folks who file 1040A or 1040EZ short forms are not eligible.
5.) Retired? Donate your IRA distributions.
If you’re 70.5 years or older, you can donate tax-free distributions from your IRAs. These may help lower your Adjusted Gross Income and can still count toward your required minimum distribution.
6.) Share your winning investments.
This can be a powerful strategy for donating to long-term disaster relief efforts. You can get two tax breaks when you donate your appreciated securities (stocks, bonds, mutual funds): avoid capital gains taxes AND claim the full fair market value of your investment.
7.) Create a donor-advised fund.
A donor-advised fund allows you to make a large charitable contribution now, deduct the entire gift on your tax return, and distribute donations from the fund to good causes over time.
8.) Know your limits.
In one tax year, you’re allowed to deduct cash contributions up to 50% of your Adjusted Gross Income (AGI), appreciated capital gains up to 20% of AGI, and non-cash assets worth up to 30% of AGI. You can also carryover deductions that exceed contributions for up to 5 years.
It’s a good year to give. According to some reports, “2017 is on track to be a record-setting year for massive natural disasters in the U.S.” Relief groups are already worrying about donor fatigue, as it becomes clear that disaster victims will continue to need lots of help.
With fewer than 80 days left in the year – you can make the most of your giving this year with strategies that benefit you AND your charity of choice.
If you’d like an objective second opinion about your finances, please reach out to Steve Stanganelli, CFP®, CRPC®, AEP® at Clear View Wealth Advisors, LLC. Email him at Steve@ClearViewWealthAdvisors.com.