‘Tis the Season to…Gift?

The holiday season is once again upon us! We all have our rituals this time of year. Some of yours may be traveling to another state to enjoy a holiday meal with loved ones, hunting for deals the day after Thanksgiving, attending a local production of the Nutcracker, or waking just in time to watch the Rose Bowl football game on New Year’s Day.

While we celebrate in different ways, one thing we have in common is that the season reminds us to give. As we clear our pantry for the food drive, deposit our loose change in the ubiquitous red can, or send a toy to a child in need, it is also a good time to consider how your charitable giving fits in with your overall financial plan.

Few things are more rewarding than making a donation to a worthy cause – except, possibly, the monetary tax advantage for doing it. Because there are many rules and requirements surrounding charitable giving, you may be missing out on some of the tax benefits available to you. Before you make another donation, be sure you are walking away with not only the euphoric feeling of giving but also with the satisfaction that you have done everything possible to maximize your tax benefit. Ask yourself these questions:

Is the organization tax-exempt? Make sure you are giving to a qualified organization. The Internal Revenue Service provides a database of tax-exempt organizations on its website.

Is your paperwork in order? To deduct a donation, you will need proof. You will need a receipt, canceled check, or acknowledgment letter from the charity. For text-message donations, you will need the phone bill with the organization’s name, contribution amount and date. For donations deducted from your paycheck, you will need your pay stub and donor pledge card showing proof of your gift. If you are donating an item worth more than $5,000, you will also need a letter from a qualified appraiser valuing the property.

Does your donation qualify? You are only making a donation if you are not getting anything of equal value in return. Donated to a charity dinner or auction lately? You can only deduct the difference between what you paid for the meal or the auction item and its fair market value.

Does it add up? Your yearly tax savings will depend on a combination of factors, including your adjusted gross income, the type and value of your donations, whether you are subject to the alternative minimum tax, and the type of charity to which you are donating. And, depending on your income and other deductions, your charitable deductions may be reduced.

Is cash best? There are other ways to donate that can maximize both the gift and the potential tax benefit. You can donate real property, stock, art work, vehicles, retirement account assets, and many other items with value. You could also put assets into a trust that creates an annual gifting legacy, join in a pooled-income fund, or contribute to a donor-advised fund to name a few. In most of these circumstances, you choose who receives the benefit.

Whether you are comfortable with your current gifting strategies or just starting to talk about charitable giving, our office can help you assess which approach may work best for you, your family, or your estate while providing some possible tax benefits.





Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Advisor. Arktos Wealth Management and NPC are separate and unrelated companies. NPC does not provide tax advice.

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