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Aah….This time of year is filled with generosity. Even curmudgeons are infected with the holiday spirit.
Remember, however, that not everyone is enjoying this season’s largess. This year and last, many people’s lives have fallen apart. People who used to be your neighbors or coworkers—or even you—are now out of work, clutching at unemployment checks, or nothing.
There are three ways you can help out—two provide tax advantages; one simply provides personal satisfaction. Let’s start with that one.
Help Family, Friends, and Neighbors
Bring joy to people you know personally. While there’s no tax break for anything you spend for the benefit of individuals, you can have such fun doing it.
Be tactful when giving presents to people who cannot reciprocate. Otherwise, your good intentions can be humiliating to the recipients. Give them what you believe they or their children would love to have—and you can afford.
Then, tell them the most cherished gift they can give you is their help with ______. Fill in the blank with something you really could use help with, and that they can fulfill. Better yet, my favorite gift for special people is a day with them. When was the last time you got to spend a day with a good friend, without distractions? What a priceless gift from your friend!
Be Charitable Right Now
We’re all looking for tax deductions, too. Write checks to your favorite charities. Make sure you get a receipt this year, especially for checks of $250 or more, to avoid losing your deduction. People in your church, synagogue, mosque, or temple can use assistance this time of year. As long as you don’t designate a specific beneficiary, your religious community can use your donations to help people in your congregation.
Don’t have money? Donate things—a car you’re not using, that old bike gathering dust in the garage, those dolls and their wardrobes that your children haven’t touched in years. As long as your items are in good condition, they’ll be welcome. Broken things are no longer acceptable to the charities—or to the IRS.
Contribute in the Future
Do you want a big tax benefit right now without giving anything up? Put your home, life insurance, or high-value or highly appreciated asset into a charitable remainder unitrust (CRUT). The charity you choose will be delighted to help you with the paperwork.
In essence, you get the use of the asset and/or its income stream right now. The charity (or charities, if you donate to several) will get the asset when you die. This is a particularly good idea if you don’t have any family or heirs. It’s also a good idea if you have pets you want taken care of when you die. You can stipulate that the charity gets the assets in order to care for your dear pet.
One last thought: This year, seniors of at least 70½ years of age may donate up to $100,000 directly from their IRAs to charities. These donations will count toward your required minimum distributions (RMD)—without you being taxed.
Eva Rosenberg, EA is the publisher of TaxMama.com, where your tax questions are answered. Eva is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com.
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The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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