Charitable Contributions: Your Generosity Becomes Savings

Charitable contributions are a powerful way to lower your tax bill and increase savings. Start planning ahead and consider implementing these valuable strategies:

Donate Securities Instead Of Cash

There are several ways to maximize your tax benefits when donating securities to charity:

1. Stock that has appreciated in value: Make sure the stock has been held at least one year. When you hold an investment for one year or more, you are able to deduct the fair market value (FMV) of the stock as a charitable contribution, and you avoid paying tax on the gain of the security. This allows you to make a charitable contribution for the cost of only your basis in the security, while receiving a deduction for the FMV of the stock, and eliminating the gain from your tax return as well.
2. Stock that has decreased in value since purchase: If you can utilize a capital loss on your tax return, you may want to consider selling the stock, recognizing the capital loss, and then donating the cash to the charity instead of donating the stock directly to the charity. This allows you to contribute the same FMV of the stock in cash to the charity, while taking a capital loss on your return.

Make Charitable Contributions Directly From Your IRA 

If you are 70? or older, and have to take required minimum distributions (RMDs) from your IRA, those RMDs are taxed at ordinary income tax rates. Lower your tax bill by making qualified charitable distributions, up to $100,000 per taxpayer per year, directly from your IRA. Charitable contributions made directly from your IRA will lower the amount of the RMD that is reported in your taxable income. This essentially moves the charitable contribution from an itemized deduction, to an ordinary deduction, resulting in more tax savings.

Contribute Only To Qualified Organizations

Before making a charitable contribution, verify that you are making the contribution to a qualified organization. You can check here: www.irs.gov/charities-non-profits/exempt-organizations-select-check. Also, ask the organization to provide verification of their charitable status. Only contributions made to qualified organizations are allowed as a deduction on your tax return.

Keep Track Of Volunteer Expenses

When you do volunteer work for a charitable organization, out-of-pocket expenses often add up quickly. You can deduct the following:

1. Automobile expenses. Keep a log documenting the date the vehicle was used for charity, the charitable organization, as well as the miles driven. The following are deductible when using your vehicle to provide charitable services:

• 14 cents per mile driven (2017 rate) or the actual cost of gasoline.
• Parking and tolls.

1. Travel expenses. As long as there is not significant time spent for personal leisure, recreation, or vacation, you can deduct travel expenses incurred while providing charitable services:

• The cost of air, rail, and bus transportation.
• Meals and lodging expenses, if the services are being provided away from your home.

Please let us know if you would like to discuss how any of these strategies could impact your personal tax situation. We will gladly run a tax projection for you, and show you the estimated amount of tax savings on your return.

Please visit PagnatoKarp's Tax Services Page for more information about the powerful impact of charitable donations. Visit us at www.pagnatokarp.com or 703-468-2700.

Read the original article here:    "Charitable Contributions: Your Generosity Becomes Savings"

Resources: TheTaxBook

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