Charitable Giving & Tax Planning

There are many ways to share your wealth. Following IRS rules can even give you a nice reduction in your annual tax bill. Tax planning allows you to give more to your favorite charity and maximize tax deductions.

  1. Cash/Check donations – always remember to keep good records of your donations and get receipts. Canceled checks are best backed up by a letter from the organization.
  1. Non-Cash donations – (clothing, household items, etc.) – again remember to keep good records of your donations and get receipts when possible. Your deduction is typically 25-30% of the Fair Market Value of the items donated.
  1. Charitable Giving accounts (Donor Advised Funds) – DAF’s allow you to donate securities & receive a current year tax deduction for the current market value. The funds are invested & available to make grants to any qualified charity (501(c) (3) organization. Charitable Giving account offers benefits such as:
    • One consolidated tax receipt.
    • Save taxes on appreciated securities.
    • Receive a tax deduction when taxable income is high.
  1. RMD (Required Minimum Distribution) at age 70 ½ and beyond from your IRA account. You can fulfil your RMD & be generous at the same time by having a check sent directly from your IRA account to a qualified 501(c)(3) organization. The benefits of this type of donation are:
    • RMD’s are added to your gross income. Donating directly to a charity counts toward annual RMD & doesn’t increase Adjusted Gross Income resulting in lower taxes.
    • Doing this could reduce the amount of taxable Social Security. RMD’s are added to your AGI which could possibly make some of your Social Security income taxable.
    • Reducing your cost of Medicare Parts B & D –Medicare premiums are based on your AGI.
    • Tax deduction if your standard deduction is higher than itemized deductions
    • Overcoming the 50% limit on charitable contributions
    • Shrink your Net Investment Income Tax – (3.8% NIIT on investment income when your AGI is greater than $200,000 ($250,000 for joint returns). RMD’s might move your AGI above these amounts.

You can review 501(c)(3) Charitable Organizations @

Here you can find star ratings, tax status, contact info, financial information, etc.

A little tax planning can stretch the amount you give to charity and reduce your tax bill. Tax planning is a year round event. Not something to think about once a year when your taxes are prepared.