Uncommon Tax Deductible Charitable Donations

With taxes topping many Americans list of biggest expenses, it’s a common question: “How much taxes can I save if I donate to charity?” It’s a win-win for both you and the charitable organization. So here’s a look at some less-commonly known charitable giving strategies.

Maximize your tax savings with these charitable donations

Required Minimum Distributions

For those 70 ½ and wiser, taking Required Minimum Distributions (RMDs) can be annoying, especially if you don’t need to draw on your hard-earned retirement savings. Wouldn’t it be handy if you could donate your RMD? Well, you can! The IRS allows Qualified Charitable Distributions up to $100,000 to count towards your annual RMD. This win-win allows the charity to receive more pre-tax money and you to avoid paying taxes on the distribution.

Donating Investments

Other overlooked items that can be donated include investments. Whether stock or real estate, so long as the asset was held at least 1 year, the charitable deduction is the fair market value on date of donation. Note that the deduction is limited to 30% of AGI.

You avoid capital gains. The charity gets to cash in.

To simplify things, TD Ameritrade, Vanguard, and Fidelity all offer charitable giving options with lists of qualified charities you can choose from.

Carrying Over Large Charitable Donations

Most charitable contributions are limited to 50% (sometimes less) of your Adjusted Gross Income (AGI). But if you do have a large donation that is limited, you can carry the deduction forward 5 years or until it is used up.

Payroll Donations

Certainly not least on the list of pre-tax win-wins is donating your payroll. Some employers including Microsoft, GE, and Boeing even offer to “match” the employee’s donation. Talk to HR to set it up. The key is to make sure the payroll deduction is treated as pre-tax.

Donating Food Inventory

Business food inventory can be donated. The restaurant and food industry is already a tough one to compete in, so being able to donate food inventory that may not be readily marketable due to appearance, age, freshness or otherwise can definitely help. This is true even if you are a Sole Proprietor. Be sure to talk to your tax advisor, because tax deduction for the charitable donation of food has strict rules.

Other Types of Charitable Donations

There are other advanced tax-saving donation strategies including foreign exchange students, foster parenting, mission trips, Charitable Remainder Unitrusts, Charitable Gift Annuities and Qualified Land Conservation Contributions. Each of these charitable tax strategies requires specific record keeping so ask your tax advisor on tips for tracking your donations.

If you want to learn more about tax deductible giving, check out Tax Planning – Online in MyOTA under Learning Activity Center or schedule a free tax consultation.

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