It’s the giving time of year! Since it’s also close to the end of the calendar year, you should be thinking about how you can give gifts that will help you out when you start preparing your tax return in a couple of months. If you itemize your tax return, you can take advantage of charitable donations.
So how can you take advantage of this during the holiday season? Here are my top favorite ways to give gifts that benefit others but also benefit your tax return:
- In order to get a tax benefit, giving must be through a nonprofit organization, such as churches, educational, and veteran’s organizations. Organizations such as Toys for Tots also qualify.
- It’s the perfect time to clean out unused toys and clothing and donate them. This also helps others who will be shopping at second-hand stores for holiday gifts. Think about taking unused items to women’s or homeless shelters, nonprofits that hold charity auctions, or groups that hold fishing days for kids, etc.
- Donate cash to a family member’s favorite charitable organization in lieu of a gift to them. Let them know you made it, but make it in your name so that you can deduct it.
- Buy gift items through local organizations. Kids are selling cookie dough, calendars, gift wrap, cheesecakes, you name it. You can’t deduct the entire amount, but you can deduct the amount you paid above the actual value of the item you received.
- You can deduct charitable hours. If you help out at the soup kitchen, deliver meals, help wrap gifts for a nonprofit group, or even stand for a few hours outside a store ringing a bell, keep track of the hours you worked. This is a great way to stay within your holiday budget, it doesn’t cost money to donate time.
- Mileage for charitable organizations is also deductible.
- Keep receipts for all gifts bought and donated through children’s organizations.
- Donate food to your local food bank, or organizations who deliver holiday meals.
- If you are donating stock to a charity, make sure you look at the stock closely before donating. If the value of the stock has declined, sell it first, then donate the cash. Then you can deduct the loss in value also. If the value of the stock has increased, donate the stock itself. You can deduct the fair market value of the stock, and don’t have to pay capital gains on the increase of value. If you sell it first, you will have to pay on the gain.
- Consider making the donations you normally make through the year now, before the end of the tax year. Many organizations offer gifts for their holiday campaigns, I know that Trout Unlimited is offering some sweet deals for donations this month. That way you can get the double benefit from donating and also getting a good gift to give away.
If you’re going to be giving anyway, it doesn’t hurt to get a little tax benefit from your gifts. Just be sure to track receipts, mileage, and hours so that you’re not trying to remember and reconstruct come tax season. Happy holidays, and happy giving!