Financial Giving - How To Make the Most Of It
By Kerry Spangler
There are many ways to spend your hard earned dollars, from buying fancy cars and fine clothes to indulging in fine dining and exotic vacations. There is certainly nothing wrong with rewarding ourselves for a job well done, but what would happen if we rewarded someone else instead? Studies have shown that charitable giving often lead to benefits that bless the giver, as well as the recipient. This is not a revolutionary concept. However, there are several more subtle ways that giving your money and time can benefit your psychological, spiritual and emotional well-being. This is especially true when one donates to a local charity that directly affects the lives of local folks who are less fortunate than themselves. Perhaps Today Ministries International is a local charity that has achieved outstanding results within our local community. The tireless work of this local charity has positively affected the lives of many individuals in our vicinity. This award winning charity works with one individual or family at a time and every dollar received furthers their charitable purpose.
Here are a few examples of giving.
Cash donations are simple and are typically tax deductible in full. You will need a receipt from the charity or some other record to substantiate your gift no matter how small. Please remember that donations made via credit card are fully deductible in the year charged regardless of when you pay your credit card bill.
Charitable Remainder Trusts
This is one of the few times in life that you can both have your cake and eat it to. A Charitable Remainder Trust (sometimes referred to as a Charitable Remainder Annuity Trust or CRAT) allows you to receive a current charitable deduction, avoid estate taxes and still enjoy income from your assets. The key benefits of CRAT’s are:
- Fixed income stream payable to both you and your spouse for as long as either of you are alive,
- Income tax deduction available for the computed value of the gift,
- Investments are managed inside an income tax exempt trust, making investment decisions easier,
- The trust can be used to sell a highly appreciate asset and avoid tax on the sale, and
- The trust assets pass estate and income tax free to your designated charity after both you and your spouse are deceased.
Tangible Personal Property
You can donate almost anything, including used clothing, household goods and used vehicles. Clothing and household goods must be in reasonably good condition. The fair market value of the items donated is deductible on your returns, with the singular exception that if a donated vehicle is sold by the charity you can only deduct the cash that they received.
You can deduct your transportation costs and other out-of-pocket expenses for volunteer work done for a charitable organization. Please remember that this includes work done for your church, such as serving on committees. Unfortunately, you cannot deduct anything for the personal time you spend working for your chosen charity.
Ordinary Income Property
You can donate property that would otherwise generate ordinary income for you, such as inventory held for sale or, if you are an artist or craftsperson, items that you created for sale.
Long-term capital gain property
You can usually deduct the fair market value of appreciated capital assets that you have acquired in years past, such as stocks and bonds. You must have held these assets for one year or longer to take advantage of this tax law. There is one other consideration in this case, since these types of donations are limited to 30% of your Adjusted Gross Income.
Other giving options
There are many other options available if you want to make a long term commitment to charitable giving. Many people think of charitable bequests as an estate planning tool. However, you should also consider charitable remainder trusts (previously discussed), private foundations and other options as a means of passing your assets to your chosen charities.
Studies have shown that you can receive the following benefits by contributing to charities such as Perhaps Today Ministries International:
- Gifts to charity may improve your sense of well-being
- Supporting a charitable cause can keep you informed about a variety of issues
- Giving to charity out of spiritual conviction can strengthen your spiritual life
- Volunteering with a charity may result in physical and social benefits
- Your donations may be tax deductible (this is especially near and dear to my heart)
You should meet with a qualified, professional tax professional and consider the following strategies to maximize your tax benefits through giving.
For more info call Kerry J. Spangler at Spangler and Company CPA firm (717) 938-5340 or email at email@example.com.