FINANCIAL FOCUS: Charitable giving can present desirable tax deductions

Joe Faulk

Joe Faulk

Published: Friday, November 29, 2013 at 12:00 PM.

If you have the financial resources to provide a comfortable life for your family, you have reason to be thankful.

And if you can afford to share some of your “bounty” with charitable organizations, you may want to be as generous as possible; such gifts may allow you to both give and receive.

By donating cash or other financial assets, such as stocks, to a qualified charity — a religious group or a group that has received 501(c)(3) status from the IRS — you help benefit an organization whose work you believe in and, at the same time, you can receive valuable tax benefits.

If you give $100 to a qualified charity, and you’re in the 25 percent tax bracket, you can deduct $100, with a tax benefit of $25, when you file your 2013 taxes. Therefore, the real “cost” of your donation is just $75 ($100 minus the $25 tax savings).

Furthermore, if you donate certain types of non-cash assets, you may be able to receive additional tax benefits. Suppose you give $1,000 worth of stock to a charitable group. If you’re in the 25 percent bracket, you’ll be able to deduct $250 when you file your taxes. And by donating the stock, you can avoid paying the capital gains taxes that would be due if you had eventually sold the stock yourself.

To claim a charitable deduction, you must be able to itemize deductions on your taxes. Charitable gifting can get more complex if you choose to integrate your charitable giving with your estate plans to help reduce your taxable estate.

The estate tax is consistently debated in Congress, and the exemption level has fluctuated in recent years, so it’s not easy to predict if you could eventually subject your heirs to these taxes.



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