Thrifty Thinking: Year-End Charitable Gifting

Most people make the bulk of their charitable contributions during the year-end holiday season. Now could be a good time to help a charity and cut your tax bill – especially tax provisions that end in 2013 that you can use for charitable gifting. 

The CaliforniaSociety of CPAs is the state’s largest non-profit professional association representing more than 40,000 CPAs that specialize in tax, accounting, auditing and consulting services such as personal finance. They offer the following strategies:

Strategy 1: If you are 70 ½ or older you may be able to donate funds from your IRA to a charity. As part of the Emergency Economic Stabilization Act of 2008, Congress allowed an important window of opportunity to remain open to help support charities across the country. The provision enables IRA owners -- age 70 1/2 or older -- to directly transfer up to $100,000 tax-free to charity of their choice.

Since this benefit is set to expire in 2013, donors who have considered making a generous gift at some time in the future may want to consider the tax benefits of funding a gift in this manner before the end of the year.

Strategy 2: Consider donating to support disaster relief and receive a tax deduction.

You can deduct contributions for flood relief, hurricane relief, or other disaster relief to a qualified organization. However, you cannot deduct contributions earmarked for relief of a particular individual or family. You can deduct your contributions only if you make them to a qualified organization. To become a qualified organization, most organizations other than churches and governments, as described below, must apply to the IRS.

Strategy 3: Consider donating clothing and household goods. Many charities are happy to accept used clothing and household goods, and you're allowed to claim the fair market value of those items as a tax deduction.

Strategy 4: Consider donating your car to charity. Rather than go through the hassle of selling an old car, you may get a tax deduction for donating the vehicle to a charity. An increasing number of charities have turned to car-donation programs. In taking this approach, however, keep in mind that the amount of the deduction you will be allowed to claim is subject to special limitations. In many cases, the deduction you can claim is less than your view of the car’s value. If you compare the tax savings from a donation with a dealer’s trade-in offer, the offer may not seem as small. For cars worth over $500, the deduction will be the amount for which the charity actually sells the car, if it sells the car without materially improving it. This limit applies to any motor vehicle designed for road use, including vans and trucks, as well as to boats and airplanes.

In addition, the IRS has a web site on this issue.