For example, if you bought 100 shares of stock several years ago for $5 per share and it was selling for $10 per share when you donated it to a charity, you can claim the full appreciated value of $1,000 as a charitable deduction. Remember, this valuation applies to long-term holdings. If you owned the stock for a year or less, you could deduct only what you originally paid for the asset -- $500 in this case.
A growing number of charitable groups have established programs to accept gifts of appreciated property. Check with your favorite charity to see if it can help you through this donation process.
Ease your tax bill, help your country
If you're feeling particularly patriotic, you can help reduce the country's public debt along with your tax bill.
The Treasury regularly borrows money by selling Treasury securities such as T-bills, notes, bonds and savings bonds to the public. This public debt helps raise cash to keep the U.S. government operating. Any contribution you make to reduce the national debt burden is deductible as a charitable contribution on your tax return for the year in which you make it.
You should make the payment as a separate check payable to Bureau of the Public Debt and send it to: Bureau of the Public Debt, Department G, P.O. Box 2188, Parkersburg, W.Va. 26106-2188. If you prefer, you can save a stamp and stick the check in your tax return envelope.
Same donation rules apply
Although some of these charitable donations are not commonly taken, tax rules still apply.
To be deductible, contributions must be made to qualified organizations. Ask the group if it meets IRS guidelines. Most will be able to tell you. Or you can check IRS Publication 78 online for the latest list. You also can call the IRS at (800) 829-1040, TTY/TDD connection at (800) 829-4059, to find out if an organization meets IRS charitable standards.
You now need documentation, such as a bank or charge card statement or a canceled check, for all monetary gifts. If your gift is worth $250 or more, you must get an official receipt from the organization before you can claim the deduction.
Don't get greedy
While Uncle Sam is pretty flexible about letting you write off your good works, don't go overboard. There are some things the IRS says it won't allow.
Good deeds the IRS won't let you write off include the following.
- Contributions to a specific individual, regardless of the person's neediness.
- Contributions to a group created to lobby for law changes.
- The value of your time or services, such as the income you forfeited to work as an unpaid volunteer.
- Your personal expenses. For example, the cost of meals while you're volunteering.
- Appraisal fees to determine the value of donated property.
- Contributions to homeowner associations, social or sport clubs, civic leagues or chambers of commerce.
If you made any of the other little-known but IRS-approved contributions last year, be sure to count them when you file your return. And if your largesse came Jan. 1 or later, start a deductible contributions file now so you'll have the information at your fingertips when you file your taxes next year.
More details about tax deductions for charitable contributions are found in IRS Publication 526, Charitable Contributions, and Publication 561, Determining the Value of Donated Property.
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