MINNEAPOLIS - What does giving to charity mean to you? While the greatest reward of giving may be the knowledge that you have made a difference in the lives of others, charitable giving can also provide tax benefits, if you know how to give and how to keep track of what you have donated. Dan Ament, Financial Advisor with Morgan Stanley joins us to discuss some thoughts to consider.
Giving Methods at a Glance
Direct Gifts of Cash-Direct cash donations are the easiest to report. Always pay by check and make the check payable directly to the charity.
• Cash gifts of any amount are not tax deductible unless accompanied by a bank record or a written receipt from the charity. See IRS Publication 526, Charitable Contributions, for details.
• For contributions (either cash or property) worth $250 or more, you must also obtain a written acknowledgment from the organization indicating the amount of the cash and/or a description of any property contributed. If any goods or services were provided by the charity in exchange for the gift, a description and a good faith estimate of the value of those goods or services must accompany your tax return.
• See IRS Publication 526, Charitable Contributions, for details.
Gifts of Appreciated Investments - Can be direct to non-profit or into a Donor-Advised Fund-A fund maintained in your name by a public charity from which you may recommend grants over time for charitable purposes.
• An immediate tax deduction, up to 50% of adjusted gross income for cash; 30% for appreciated assets.
• May avoid capital gains tax for gifts of long-term appreciated securities.
Direct Gifts of Property-Noncash gifts of property include such items as clothing, jewelry, furniture, computers, automobiles and boats.
• You generally can deduct the fair market value of property you donate to a qualified charity.
• If your deduction is worth between $500 and $5,000, you must complete IRS Form 8283 and attach it to your return. To claim a single noncash gift worth more than $5,000 (excluding publicly traded stock), you must include an appraisal of the gift's value with your tax return.
• See IRS Publication 561, Determining the Value of Donated Property, for details.
Callout: Is Your Charity Legal?
• In order for your contributions to a charity to be tax deductible, the organization much be registered as an official charity under IRS Section 501(c). To verify the status of a particular organization, use the IRS Exempt Organizations search tool.
Bottom line: You should consult with a legal and tax professional on charitable giving matters.
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