Donations and Deductions

2018 is winding down, the holiday season is coming up, which means the tax season is almost over. If you’re like the majority of the population, you like getting a nice tax refund in the spring because who doesn’t like a little extra money. Here are a couple tips you can use if you’re feeling in the giving spirit this holiday season and plan to donate money to charities, while also helping your taxes.

The first option is instead of giving cash to your favorite charity, consider giving appreciated securities, such as stock. When you itemize your taxes, the taxpayer can take a deduction for the amount the stock is worth, and in turn the charity does not have to pay any capital gains tax on the stock if the taxpayer were to cash in the stock on their own. This is because charity organizations (mostly) do not pay taxes, so by giving them an asset and allowing them to cash in on it, saves you value and gives them greater benefit.

The second option is to open a donor-advised fund. Donor-advised funds will allow a taxpayer to set aside cash or securities that you intend to donate. When the taxpayer decides which year they plan to donate, they can take the tax deduction in that year. One reason this method is preferred is because it allows the taxpayer to have the donations in one spot, instead of multiple transactions.

If you have questions about donating and deductibles, contact us at the Center for Financial, Legal & Tax, Inc.