Boosting your charitable gifts while lowering your tax bill

Boosting

your charitable gifts while lowering your tax bill

For the charitably inclined, the end

of the year often brings an outpouring

of opportunities to make

charitable donations. Whether it's a solicitation

from your alma mater or a

request from your church, writing a check is the

easiest way to donate. But

there are a number of other ways you can help

your favorite charity and

benefit your own tax situation as well. The

Georgia Society of CPAs

offers the following advice.

GIVE APPRECIATED ASSETS

While a check may be the

easiest, non-cash gifts can give a charity more and

cost you less. The next

time you plan to make a sizable donation to your

favorite charity, review

your portfolio to see if there are any securities

that have appreciated in

value that you could donate instead. Giving stock

instead of cash is an

excellent way for you to save on taxes while

benefiting your charity of

choice. When you donate appreciated property held

longer than one year, you

can write off the full fair market value of your

donation, plus you don't

owe any capital-gains tax on the profit you would

have realized if you sold

the asset.

DONATE PROPERTY

Many charities are making

it easier for you to donate property you no longer

need. For example, more and

more organizations are willing to make all the

arrangements for donating

an old car, including transferring the title and,

if necessary, towing the

vehicle away. Whether you donate an old car, used

clothes, or worn furniture,

your tax deduction is equal to the donated

item's fair market value

- meaning what you would get if you currently sold

the item outright. If the

value of your gift is $250 or more, however, you

must obtain a written

acknowledgment that includes a complete description of

the donated property to

verify the contribution for tax purposes. In

addition, if the value of

your property donations exceeds $500, you must

report your donations on

Form 8283. You'll need a professional appraisal as

well if the value of your

non-cash donation exceeds $5,000.

Special rules apply when

you donate tangible personal property, such as art.

Tax law specifies that you

qualify for a full deduction for the fair market

value of the property only

if the items are used in the course of the

charity's charitable

function. For example, donating a valuable painting to

an art museum would qualify

you to deduct the gift's full market value.

However, if you were to

donate the same painting to a social services

agency, your deduction may

be limited to your basis in the property - that

is, what you paid for it

- rather than its appreciated value. To

substantiate your

deduction, CPAs suggest you get a confirmation letter

from

a charity which will use

your gift in connection with its main activity or

purpose.

SET UP CHARITABLE TRUSTS

A charitable trust can be a

valuable tool for people planning substantial

donations. In the case of a

charitable remainder trust, you donate (on an

irrevocable basis) cash or

property to the trust and you, a family member,

or other beneficiaries

receive income from the trust for a set period of

time, or for as long as you

live. At the end of that time period, the

property passes to the

charity. When you establish a charitable remainder

trust, you receive a

current deduction for the present value of the gift

that the charity will

receive in the future and you receive a continuing

stream of income from your

property. However, since the Taxpayer Relief Act

of 1997 tightened

regulations concerning charitable remainder trusts, you

might want to consult a CPA

before establishing one.

A charitable lead trust is

the opposite of a charitable remainder trust. You

donate cash or property to

a trust and the charity gets the income while

you're alive. Then, at your

death, the assets revert to your estate. In the

meantime, you receive an

up-front deduction for the value of the income

stream that will go to the

charity.

DONATE LIFE INSURANCE

Another option is to donate

your life insurance policy to charity. You may

deduct the value of a life

insurance policy, if the charity is irrevocably

named as owner and

beneficiary of the policy. (Simply naming a charity the

beneficiary of a policy

does not earn you any tax benefits.) The amount of

your deduction depends on

the type of policy you donate. Your insurance

company can help you

calculate your deduction. If you continue to pay the

premiums on the policy, you

generally may deduct the cost of the premiums.

(Gifts of insurance are not

allowed in Vermont.)

The more you make Uncle Sam

a partner in your generosity, the more generous

you can afford to be. If

you're planning to make a sizable gift to a

charity, consult with a tax

professional for advice on how to make the most

of your donation for both

you and the charity.

The GSCPA is the premier

professional organization for CPAs in the state of

Georgia. With over 10,000

members throughout the state, the purpose of the

GSCPA is to promote the

study of accountancy and applicable laws, provide

continuing professional

education, maintain high ethical and work standards,

and provide information

about accounting issues to the membership and the

public. For more

information, access our web site at www.gscpa.org