Stern Advice: Tax breaks, matches can boost charitable gifts
WASHINGTON (Reuters) - Perhaps you have opened your wallet to help the afflicted in Japan -- and before that, Haiti, and New Orleans. And you've donated money to your church, the local homeless shelter, symphony and the Boy Scouts.
Now what? First, keep it up. Americans give away more than $300 billion a year and that generosity helps in immeasurable ways.
But it can help even more if you take the next step and optimize your gifts. There are ways to make them have as large an impact as possible. One is to make sure you collect your employer's matching contribution. Another is to prod others to support your cause.
You can also make the most of your gifts by contributing in a tax-smart way, and by taking every tax deduction possible for your charitable gifts. Don't think that in any way diminishes them; rather, it enables you to make more gifts.
Here's how to leverage up your donations, and get the tax breaks that are coming to you.
-- Hunt for matching contributions. Both daily coupon sites Groupon and Living Social were offering 100 percent matches on small gifts to the Red Cross after the Japanese earthquake/tsunami/nuclear disaster. For example, the Living Social deal offered a $10 Red Cross contribution for $5 -- it was easy and effectively doubled the amount received.
To find matching funds, read the ads in your email and snail mail, and look a little bit further. Check with your employer and your local community foundation to see whether either has a matching gift program. (My employer, Thomson Reuters, has generously offered to match all contributions up to $2,000 per person.)
-- Note that not every match is a real match. Charities sometimes use the idea of matching pledges to generate more gifts. They will send letters saying something like "our benefactor has offered to match any gifts we receive within the next six weeks, up to $20,000." That's nice. But there is a decent chance the nonprofit will still receive the $20,000, regardless of whether you donate money. Your donation will still be appreciated, but it doesn't necessarily translate into a higher level of giving.
-- Host a party. If you don't have a lot of money for a cause that is near and dear to your heart, you may be able to use your limited resources to boost contributions by hosting your own fund-raising gathering. With $100, for example, you could buy a few bottles of wine and some bread and cheese. Invite a few friends and let them know you are gathering people to solicit funds for your favorite cause. You may win over permanent supporters as well as collect more than your original $100.
-- Give shares of stocks or mutual funds that have made money for you. If you sell them first, taxes will be owed on the capital gains that were built in the investment. But a tax-qualified charity will not have to pay, so give the shares and let them sell the stock for you. If, for example, you paid $1,000 for some shares of Apple Inc and they are now worth $2,000, about $150 in gains taxes would be owed when you sold the stock. That would leave $1,850 for the charity. Donate the shares instead and the organization will get the full $2,000.
-- Track your gifts carefully. The Internal Revenue Service has gotten tough on deducted contributions that do not have any proof behind them. You will need a canceled check, telephone bill (for texted gifts), bank statement or receipt for everything you donate.
The agency has also cracked down on folks taking tax deductions for "gifts" of useless, old, worn clothing. So, make sure the items you give are in good condition. Then, keep track of them so you don't forget or undervalue the items you do give away. There is a phone application for that, called UDoGood. You can also guesstimate the value of your non-cash gifts by using ItsDeductible from TurboTax (here). Both Goodwill and the Salvation Army also provide donation valuation guides.
(The Personal Finance column appears weekly. Linda Stern can be reached at linda.stern(at)thomsonreuters.com)
(Editing by Maureen Bavdek)
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