The New York Daily News relies on Tony Martignetti’s knowledge of charitable giving tax incentives.
Gifts to Charities, Helping Others – and Yourself
By Elizabeth Lazarowitz, Daily News Business Writer
Holidays got you in a giving mood? Make an addition to your gift list: a charity. With hundreds of groups clamoring for a bit of your limited budget, though, you don’t have to be Scrooge to wonder, “What’s in it for me?”
“The primary motivation to give really has to be a love of the work that the organization does,” said Tony Martignetti, manager of Planned Giving Advisors, which helps nonprofits raise funds. “But I think a close second is the tax benefit.”
If you’re planning on itemizing deductions on your tax returns, including donations can help offset your income tax. For someone in the 25% tax bracket, for example, a $100 donation to your favorite cause will cost just $75.
About 70% to 80% of Americans contribute annually to at least one charity, a report by the Giving USA Foundation and the Center on Philanthropy at Indiana University showed.
While you can’t take your volunteered time as a deduction, you shouldn’t forget to deduct any costs you incurred while volunteering, such as mileage you put on your car.
If your donation will be a somewhat modest sum, you might want to give it to a smaller organization in your community that may not have the flood of funds that better-known groups often do.
“At a local homeless shelter, $15 can allow them to buy 15 boxes of macaroni and cheese that actually goes to people who need help,” said Trent Stamp, president of charity research group Charity Navigator.
Try to target one or two groups to avoid spreading your donations too thinly, Stamp said. “It’s important to diversify when you buy stocks, but if you do that when you donate, you become inefficient and ineffective.”
A larger, consolidated donation also makes it less likely that a group will sell your address to other organizations, which can result in an annoying avalanche in your mail box of letters from groups seeking for money, Stamp said.
Don’t forget that many employers will match their workers’ donations, so if yours does, it could double your gift.
Just because a group has “tax exempt” status doesn’t mean donations are tax deductible. To make sure you can write off a donation, check with your local IRS office or www.irs.gov.
If there’s no extra cash in your budget, check around your house for items – a suit that no longer fits, the guitar you never play anymore, your old computer – that you can donate to a thrift shop. For tax purposes, you can estimate the value of the items yourself, or use a tool like TurboTax’s It’s Deductible software. But remember that donations of goods valued over $250 require a receipt.
Some groups accept gifts of stocks, so consider that if you have company shares that have risen in value. Not only can you deduct the current value of the shares on your itemized tax return, but you also won’t have to pay a tax on the gain in the value of the stock, said Martignetti.
If you donate items that have risen in value, like your grandmother’s collection of old records, you can deduct their current market value, but only if the group can use them in their charitable work (such as by teaching music) and if they keep them for at least two years. Otherwise, you can only deduct the amount they originally cost, Martignetti said.
Car donations are a red flag for the IRS right now. You can only deduct the amount the charity gets for the car, not the market value, and any gift valued above $5,000 now requires a “qualified appraisal,” Martignetti added.
Even if you have nothing to give, you can buy holiday cards from charities that offer them – a list that includes UNICEF, National Audubon Society, Children’s Defense Fund and Special Olympics – helps support those organizations. Instead of getting your animal-loving friend another Dog-of-the-Month calendar, make a donation in their name to a local animal shelter. Web sites like justgive.org and networkforgood.org offer “charity gift baskets” based on a number of themes.