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’tis the season for tax planning and giving

Local banker explains some of the options to consider

December 6, 2009
Messenger News

Charitable giving is not only good for your soul; it can be good for your wallet, too. As the end of the year draws near, so does the opportunity to make a charitable gift to your favorite charity or nonprofit organization that will not only benefit others in your community, but give you some significant tax benefits.

The closing months of the year are always a prime time for tax-wise financial planning. Those who enjoy charitable giving, as well as benefit financially from it, may want to look at the amount and timing of their gifts, in order to maximize their tax savings this year. After all, charitable deductions, as a method of reducing taxes, are totally within the individual's control.

Tax savings and other financial advantages of charitable giving loom especially large for older Americans. They can benefit, for example, from current rates of charitable gift annuities, which are always subject to change.

Charitable gift annuities allow donors to contribute cash or other assets to charities in exchange for fixed lifetime payments. The percentage of a gift that a charity pays a donor varies with the donor's age. For example, a 60-year-old making a gift today would lock in a payment rate of 5.5 percent. By comparison, the rates are 6.1 percent for a 70 year old, 7.6 percent for an 80-year-old and 10.5 percent for a 90-year-old.

Lawmakers have protected and enhanced provisions in the tax code that encourage charitable giving because they support the important work charities do for individuals and communities across the country.

Cash and checks are by far the most common donation for those seeking to reduce taxes while supporting one or more of their favorite causes. In general, the IRS allows deductions on cash gifts of up to 50 percent of adjusted gross income. Donors also may deduct gifts of appreciated property, including real estate and securities - individual stocks, bonds or mutual funds.

Fact Box

Get the facts before you give

Know the charity. Get information about the charity before you donate.

Don't give in to emotion or pressure. Take time to think about your decision. A real charity will take your donation anytime.

Never give or send cash. Use checks payable to the charity's full name. Read and keep all of your receipts.

Don't give out your personal information. Your Social Security number and bank account information should not be needed to make a donation.

Beware of copycats. Some names sound like well-known charities to fool you. Make sure you know which organization you're donating to.

Investments that have decreased in value can be sold with the cash proceeds being donated to a charity. This could create a double deduction - the capital loss and the cash donation. In some situations the combination of deductible loss and charitable deduction may result in a total deduction more than the current value of the investment.

If donors' charitable gift deductions exceed the limit for 2009, the leftover deductions can reduce their taxes for up to five more years.

Many less obvious ways to achieve charitable deductions are available. Those aged over 70 1/2 years and older, for example, may withdraw from their IRAs or other tax-favored retirement plans enough to fund their charitable gifts for the year. Although they must report the income on their tax return, they may take a corresponding deduction for the charitable gift.

Obviously, options for charitable planned giving and the corresponding tax deductions are many and varied, but donors must act now and have all paperwork completed by Dec. 31 to potentially reduce their taxes while supporting their favorite charities. In order to make that deadline, the process needs to start as soon as possible. Don't wait until the last minute.

The first step is to focus on what it is that you care about and what charity or organization that you would like to give to. Find a cause that you have passion for and believe in and get behind it in a meaningful way.

I have a strong personal passion for finding a cure for cancer and am a volunteer leader for the American Cancer Society's Relay for Life. The American Cancer Society is dedicated to eliminating cancer as a major health problem by saving lives, diminishing suffering and preventing cancer through research, education, advocacy and service. The Society is the largest source of private, not-for-profit cancer research funds. For more information I would encourage you to call (800) ACS-2345 or visit By making a planned gift to the American Cancer Society, donors will not only help in the fight to insure more birthdays and less cancer, but they will also potentially reduce their taxes and plan for their financial future.

As Americans rush headlong into the holiday season, it's important to remember that this is just as much a time for reviewing financial matters and minimizing taxes as it is for basting turkeys and buying gifts. Charitable giving is something to think about and plan for year-round, but use this holiday season to take advantage of deductions for this tax year by taking the appropriate steps now.

Craig Schlienz is vice president and market manager for First Federal Savings Bank of Iowa and the volunteer chairman for the Webster County Relay for Life.



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