Christmas is coming and it is a great time for giving gifts! Giving to charity is a good idea especially when you know that your gift will be useful and wanted. How can donating save on taxes? First, you can make donation from your individual requirement account (IRA.) People age 70 and older are required to take minimum distributions from their IRAs which increase their taxable income. According to the Pension Protection Act of 2006, you can make annual charitable distributions up to $100,000 from your IRAs. Satisfying your minimum distribution, you can exclude the charity amounts from your taxable income.
Distributions must be made directly to public charity, i.e. a community foundation (private
foundations and donor advised funds do not qualify) from the IRA trustee. Unfortunately, the deadline to take advantage of this opportunity is December 31, 2011, so hurry up so it is not to late!Another option, is to make non-cash donations by donating assets. If your assets have decreased in value recently it’s quite nice for you. Transferring an appreciated asset to charity allows you to claim a charitable deduction for the fair market value of the gift and avoid the capital gains tax you would have paid when you sold it. These gifts can be given outright or be used for charitable arrangements.
We will discuss other ways to save on taxes though donating in following articles, Interested? Follow us!
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