Give and you shall receive. That’s from the Bible, and the government agrees with the idea. Here are a few excellent reasons to part with some cash or valuables:

  • It’s good for others.
  • It’s good for your heart, conscience and soul.
  • It might be good for your taxes.

Admittedly, Uncle Sam supports the give-and-receive parable only when tax deductions are itemized. If you’re certain that you’ll be itemizing in April or even if you’re on the edge of that standard deduction, get into the giving spirit.

First things first. Pick a cause you feel good about. There are quite a few types of charities to choose from: protecting animals, finding a cure for a deadly disease, supporting the arts and helping those less fortunate. Only your priorities can tell you what’s right for you.

Keep the interests of those you love in mind as well. You can plan your charity giving as part of your holiday gift giving. And you get a gift too because you get to keep the tax deduction all to yourself.

Soft touch

But you can’t go giving your money or stuff away to just anyone who hits the soft spot in your heart. Cousin Vinnie may be a sad sack, but the government requires you make donations to a legally recognized charity, at least if you want to take this donation off your taxable income.

How do you do that? Do a little research. It’ll take you just a few minutes on the Internet to check out the legitimacy of any major organization. Since you want your money used for the cause, you’ll also want to make sure that a charity is being charitable with its money. For a decent rating from the major philanthropy watchdog, the BBB Wise Giving Alliance, a charitable organization has to use at least 60 percent of each donated dollar (not just profits) for the cause, rather than for fundraising or administration.

The alliance’s mission is to promote informed giving and to enable contributors to make sound giving decisions. Toward that goal, the BBB Wise Giving Alliance provides evaluations of more than 350 charities on its web site:

Keep the cash, unload those valuables

Your first instinct may be to write a check to “Save The Unicorns” or the “Cure the Disease-of-the-Month Club.” And that’s a fine instinct. However, you might feel even more generous if you discover more economical options for giving. Instead of straight moolah, you can give something valuable.

Perhaps you have a used car to unload. Sure, you could use it as a trade-in on a new one. But perhaps the dealership is offering you a lousy deal, and you’re facing a big tax bill next spring. You might do better financially to turn over the keys and title to a charity. You get to deduct the car’s value on your tax return. Keep in mind this means the “fair market value,” not necessarily the full Blue Book value.

If the write-off for the auto is more than $500, you need to file IRS Form 8283 at tax time. If you’re looking at a write-off of more than $5,000, get an independent appraisal in writing. You don’t want the IRS looking at your return suspiciously.

Now for the really valuable stuff. If you’re one of the lucky investors who bought at $25 a couple years ago, you’ve probably been bragging about it. But you’re also wondering about all those taxes that selling it will bring down on your head. Aha! You can help out a charity and dig yourself out of a hole with the IRS.

Give some of that inflated stock to a worthwhile group. You get to write off, and your charity profits from the current value of the stock. The only loser is Uncle Sam who misses out on all those juicy capital gains taxes you’d have to pay if you’d sold it yourself. But you know what? Uncle Sam’s not a charity case, so don’t worry about it.

Even if you don’t have one of these much-ballyhooed stocks to unload, you can perform this nifty tax-shuffling trick with any appreciated stock or capital gain property that you have held more than a year. Be sure to give it to a qualified charity, groups such as the Boy Scouts of America, The Red Cross, your church, synagogue or local community foundation. Your donations will be pointless tax-wise if you give to a “private group” such as a civic league, a private foundation, a lobbying group or an organization run for personal profit. And for any high rollers out there, beware that you only get to write off that stock donation up to 30 percent of your adjusted gross income.

Generosity pays off

Whether you give money, a used car or stock certificates to your favorite cause, remember to get a receipt. The IRS requires proof of any donations that total more than $250. So if you’ve been throwing a 10 dollar bill in the collection plate each Sunday for the past year, you will need a receipt for the total.

There are no guarantees how your charitable actions will affect your heart and soul. But with receipts and a good tax plan, you can be looking sweet in the eyes of the IRS by April 15.

See also…

Tax Law – Forum

Nonprofit Law and Fundraising