Charitable gifts are one of the few remaining federal income tax deductions, and the only deductions a taxpayer can create. The following facts will greatly assist you in making gifts that will generate a deduction for you and benefit your favorite charities.
- A charitable donation is only deductible if you itemize deductions. To itemize, you need an official receipt for any gift of $250 or more -- a canceled check is no longer adequate.
- Deductions can only be taken for gifts to organizations qualified as tax exempt and charitable by the IRS. Check an organization's status before contributing.
- Contributions of appreciated property like stocks, bonds and mutual fund shares are especially popular because of continued market highs. These types of donations are usually deductible at their full fair market value -- even if their original cost to you was much less -- and you don't pay capital gains taxes on the difference.
- Appreciated securities, however, are only deductible at their appreciated value if they have been held by you for at least one year and then donated (not sold first, then donated), to a public charity, or a private foundation.
- The amount of your tax deduction depends upon the type of gift you make, the vehicle used and the donation's size in relation to your adjusted gross income (AGI).
For example: If you make a gift to a public charity (such as your alma mater, local health center, or the Fidelity Investments Charitable Gift Fund, 1-800-682-4438), you are eligible for a deduction of 100 percent of the size of your gift as long as the deduction is no more than 50 percent of your AGI for cash gifts or 30 percent of your AGI for securities. You can carry over any deductions above those amounts for the following five years.
- For those who want to take a tax deduction this year but want the flexibility to spread their decisions and gifts to charity over time, Fidelity Investments Charitable Gift Fund makes sense. It is an especially popular vehicle for donations of appreciated securities.
- For those who want to take a tax deduction and want to receive income from their gifts, the Charitable Gift Fund's Pooled Income Fund is an excellent option.
