“Individuals gave more than $258 billion in charitable donations in 2014 -- a 5.7 percent increase over the previous year.” If you're one who likes to support worthy causes, make sure to take advantage of the tax benefits that come with your gifts.
"We tell donors not to feel bad about taking tax breaks," says Sandra Miniutti, spokesperson for Charity Navigator, a nonprofit organization that tracks and rates charities for donors. "After all, if you take those tax benefits into account, you may be able to give even more to your favorite charity." Here are some ways to make the most of your giving:
- Take a deduction. The money you contribute to an IRS-approved charitable organization is tax deductible, so your gifts reduce your taxable income and your annual tax bill. If you're in the 25 percent tax bracket, each dollar you give actually costs you just 75 cents -- so the deduction may enable you to give more.
- Give appreciated securities. Donating investments that have grown in value offers a dual benefit: You can deduct the full market value of your gift on your income-tax return, and you won't owe any capital gains tax on the investments. "Donating appreciated stock can be a great way to give," says Miniutti. "Just make sure to talk with the charity in question so it can help you facilitate the gift."
- Donate other items. That 12-year-old car sitting in your driveway may be an eyesore, but a charity might consider it a valuable asset. Just be sure to follow the IRS' strict guidelines governing deductions for non-financial gifts. If you donate a car, you can deduct the fair market value, which may be lower than its Kelley Blue Book value. Whether your gift is a check made out to the charity, a bundle of stocks or an old sedan, you'll need to follow certain rules to make sure you can take advantage of tax breaks. The first is to itemize deductions on your annual tax return. The second is to make sure the charities you donate to are tax exempt. The IRS has a search tool you can use to check the tax status of charitable organizations. Miniutti also suggests taking a few minutes to research charities before making donations. Charity Navigator rates charities based on criteria from financial health to transparency, and other sites, such as GuideStar and the Better Business Bureau's Wise Giving Alliance offer similar services. "The more you know about a charity, the more confident you'll be making gifts to them year in and year out," she says.