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Year-end Charitable Giving
by Marcia Peterson

Our reasons for giving are as varied as our personalities and as wide-ranging as the charities to choose from. We may give from empathy or guilt or gratitude. But whatever the reason for choosing to give, it makes sense to do so in a way that takes advantage of tax deductibility.

To encourage charitable giving under these trying economic times, the IRA Charitable Rollover was reenacted as part of the Emergency Economic Stabilization Act of 2008. The IRA Charitable Rollover permits taxpayers who are 70 ˝ or older to make tax-free charitable gifts totaling up to $100,000 per year from Traditional or Roth Individual Retirement Accounts during 2008 and 2009. Once taxpayers reach the age of 70 ˝ they are required to make annual distributions from their retirement accounts. These distributions are normally included in your adjusted gross income. The IRA Charitable Rollover allows those 70 ˝ or older to make donations directly to charity without including them in their adjustable gross income, making this donation tax free.

For taxpayers at any age, charitable giving is an important part of tax planning. It is important for you to speak with your financial advisor to determine what makes the most sense for your unique situation. However, there are some general guidelines for all of us to follow:

Qualified Charities: You need to make sure that organizations are qualified to receive tax-deductible contributions. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. Just go to IRS.gov and type in “Search for Charities.” One key exception -- it’s important to note that churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even though they often are not listed in Publication 78.

Itemized Deductions: Only individual taxpayers who itemize their deductions on Schedule A can claim a deduction for charitable contributions. This deduction is not available to people who choose the standard deduction, including anyone who files a short form (1040A or 1040EZ).

Cash Donations: Uncle Sam likes a record. To deduct any charitable donation of money, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution – and it definitely helps to have both. Bank records mean canceled checks, bank or credit union statements and credit card statements.

Property Donations: If you give away property, including clothing and household items, get a receipt that includes a description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes a description of the property and its condition. Under a provision of the 2006 Pension Protection Act, contributions of physical items must be in good condition or better to qualify for a deduction.

Appreciated Securities Donations: This is where a financial planner or tax expert can really come in handy. When you donate stocks or mutual fund shares you have held for more than one year, generally you may deduct the stocks’ current fair market value. Additionally, you avoid paying capital gains taxes on the appreciated value.

A final thought comes from a timeless classic, A Christmas Carol: “At this festive time of year, Mr. Scrooge, it is more than usually desirable that we should make some slight provision for the poor and destitute, who suffer greatly at the present time.” Best wishes to you as you share your blessings. May you enjoy peace and prosperity this holiday season and always.

Marcia Peterson is a Private Banker for Baylake Bank. Baylake Bank, Member FDIC/Equal Housing Lender, serves its communities from 28 financial centers in Brown, Door, Green Lake, Kewaunee, Manitowoc, Outagamie, Waupaca, and Waushara counties and from its web site at www.baylake.com. For more information call 920.743.5551 or 800.267.3610.