The tax code rewards those who give – so long as they itemize their deductions. Partners who can’t file jointly, either because they are unmarried or their marriage is not recognized for tax purposes, can arrange their giving to get the greatest reward (that means the biggest tax savings) from their generosity.
If you make your charitable contributions from a joint checking account or using a joint credit card, you can usually choose which partner claims the deduction. Although you may be tempted to rely on your sense of fairness (“let’s just each take half”), it’s smart to look at who’s in the higher tax bracket. The person in the higher bracket will usually save more by claiming the charitable contributions, unless his or her income is more than $166,800. Above that amount, taxpayers start to lose part of their itemized deductions.
If crunching the numbers or planning for the biggest tax savings makes your giving feel somehow tainted, consider increasing next year’s giving by the amount of your tax savings. When you do so, your savings go to help your favorite causes.
You can boost your tax savings by thinking outside the checkbook. If you’re riding in the AIDS Bicycle Challenge, for example, you can deduct:
• Your $25 registration fee, less the value of the T-shirt. There is a rule that says you can’t deduct the value of any goods or services you receive.
• Your entire registration fee and donation if you give at least $48 yourself (not including pledges from friends, family, and other supporters). If you give at least $48, the T-shirt is considered a “token” item (an item generally costing less than $9.60) and you can deduct the entire contribution amount. Don’t you just love the tax law?
• 14 cents per mile for getting to and from the event.
• Any additional cash contributions that you give. Be sure to keep your receipt and a canceled check, bank statement, or credit card statement showing the expense.
Or if you’re sponsoring or attending the Save Inc. Corroboree, you can deduct:
• The amount you pay for a sponsorship or ticket, less the value of goods and services identified on your receipt.
• The cost of any items you donate for the auction.
• The cost of any items you buy at the auction, but only if you pay more than the value of the item. The extra amount you pay is deductible.
• If you’re volunteering at the Corroboree, 14 cents per mile for getting to and from the event.
• If you’re on the steering committee or any other volunteer planning committee, 14 cents per mile for getting to and from related meetings.
What else is deductible?
• Out-of-pocket expenses for pro-viding volunteer services.
• The value of appreciated property, such as stocks. If you paid $1,000 for stocks that are now worth $5,000, you can deduct the $5,000 value if you give the stocks directly to a qualified charity. If you sold the stock and gave cash to the charity, you still deduct the $5,000 you give, but you would have to pay tax on $4,000 of gain from the sale.
• The fair market value of contributed clothing and household goods, but only if the items are in good used condition or better. (The good used condition rule was established when a certain former president claimed $2 per pair of donated underwear. But don’t you think that, if properly “handled,” Bill Clinton’s underwear could have brought in more than that at a charitable auction?)
What’s not deductible?
• Raffle tickets.
• Games of chance, like bingo or gambling at casino night fundraisers.
• Money given to an individual (not through a charitable organization), regardless of how deserving or needy that person is.
• The value of your time or services.
• Money or items given to an organization that is not a qualified 501(c)(3) organization. If you’re not sure, you can double check the organization’s status at www.irs.gov. Go to the “Charities and Non-Profits” tab and click on “Search for Charities.”
• Political contributions.
• Contributions that are not docu-mented.
If you are aware of what’s deductible, keeping track of your giving can be more of a treasure hunt and less of a snipe hunt.
Kathy Burlison, EA, helps her clients figure out the tax consequences of their decisions at SmartSpot in Prairie Village, Kan. She can be reached at kathy@smartspotkc.com.
