Year-End Charitable Giving

Statistics show that charitable giving is down, as many people have become financially strapped in this tough economy. Still, those who can afford to give and want to benefit their alma mater or other favorite charity should understand the tax implications of donations before the end of the year.

Overview

There is nothing preventing generosity during this holiday season. However, if you want to claim a tax deduction for your giving, you must itemize your personal deductions. If you currently project that your total itemized deductions are about the same as the standard deduction amount for 2010—$11,400 for joint filers, $8,400 for heads of households, and $5,700 for singles and married persons filing separately—you might want to increase your charitable giving before the end of the year. This will entitle you to itemize deductions and get a tax break for your donations.

In 2010, there is no phase-out of itemized deductions for high-income taxpayers. This means that the full benefit of a charitable contribution deduction can be enjoyed this year even if your income is high.

IRA Rollovers to Charity

Even if you don’t itemize, you can benefit a public charity and save income taxes by transferring up to $100,000 from your IRA. This tax break is limited to those age 70½ and older. No deduction is allowed for the donation, but the amount transferred is tax free.

Note: This opportunity expired at the end of 2009, but is part of the “extender” package before Congress; the break could be extended to 2010, and even beyond.

Appreciated Property

If you own shares of stock for more than 1 year that have appreciated in value, consider donating them to charity for a double tax break:

• A charitable donation for the value of the shares at the time of the donation
• No capital gains tax on the appreciation

If you own property, such as art work, that you want to donate, be sure to obtain a required appraisal for the property.

Act before Year End

If you want your donation to count for 2010, you must act before it’s too late. Some last-minute actions you can take:

• Mail a check by December 31. As long as you put it in the mail, the donation is treated as made in 2010 even though the charity doesn’t receive the check or cash it until 2011.
• Charge the donation by credit card. Again, even though you don’t pay the credit card bill until next year, the donation by December 31, 2010, is good for 2010.
• Drop off used clothing and household items. Gently used items can benefit a charity and are welcomed at Goodwill and the Salvation Army; you can deduct their current (used property) value. Be sure to obtain an acknowledgment from the charity for your donation.

Caution: When giving securities, you’ll need to leave 3 weeks or more for the transfer agent to retitle the shares of stock or bonds to the charity. The same is true for giving shares in a mutual fund. Check with the securities’ transfer agent or your mutual fund for details.