Stephen Bishopp, CPA - Guest Writer
Many people get into the spirit of giving when it comes to the holidays. They see a need, feel a desire to bless someone’s life, and want to make an impact. However, just four months later, they feel a poke from Uncle Sam’s 39-and-a-half-foot pole when the donor realizes their giving didn’t benefit their taxes like they thought it would. Here are 3 things you can do to make sure your giving leaves the most impact, and the IRS doesn’t rob you of spreading good cheer.
1) Ensure the charity you give to is a 501(c)(3) organization. This is a section of the IRS tax code that qualifies charities as tax deductible. Most Churches and larger well-known charities are authorized under this section. If you aren’t sure your favorite organization qualifies, be sure to use the IRS tool to find out: apps.irs.gov/app/eos/
2) Consider giving appreciated stock instead of cash. This is a double benefit! Not only do you get to skip out on paying dreaded capital gains tax, but you also get a deduction of the appreciated market value of the stock. Be sure the stock has gone up in value, and you have held it for at least 1 year!
3) Double your giving, and only give every other year. For 9 out of 10 Americans, donating won’t benefit them come tax time due to how high the standard deduction is. The standard deduction is a baseline tax benefit that is used in place of itemizing all individual
deductions. People take the standard deduction because it provides a better benefit to most people and it’s simple. However, giving to charities won’t provide any extra tax benefit when you take the standard deduction.
There is, however, a way around this pitfall. If you take the standard deduction in years that you don’t donate, and then itemize all your deductions in the years you do donate, you will likely notice a bigger impact from your giving. The math of a tax return could give you a
better tax answer if you surpass your standard deduction amount every other year. Many CPAs call this strategy “bunching”. When you “bunch” all your donations together in one year, you can exceed the standard deduction amount and make the most of your giving.
As with most tax strategies, there are always nuances and specifics. If any of these tips sparked your interest, and you want to learn more about how to apply these and other strategies in your personal tax plan – feel free to give me a call and we can discuss how you can make the most tax-efficient impact with your charitable giving.
This article was written by a guest writer Stephen Bishopp, CPA. Aultium Insurance Services, LLC does not provide any tax or legal advice. For questions or for more information please OceanAveTax.Com. Stephen Bishopp, CPA serves clients nation wide.
Stephen Bishopp, CPA
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801-899-9026