June 16, 2019 9:28 pm

5 Surprising Taxwise Ways to Benefit Charity

Americans are very charitable. A report last year said (https://givingusa.org/giving-usa-2018-americans-gave-410-02-billion-to-charity-in-2017-crossing-the-400-billion-mark-for-the-first-time/) they gave over $410 billion to charitable organizations. The tax law rewards this generosity with tax breaks of various types.

1. Make a QCD

If you are at least 70 ½ years old, you can transfer funds from your traditional IRA up to $100,000 annually from your IRA to a public charity. This is called a qualified charitable distribution (QCD). The donation is not tax deductible, but produces several benefits:

  • The distribution is not includible in gross income. This may mean you gain access to other tax breaks tied to adjusted gross income (AGI).
  • The distribution counts toward your required minimum distributions (RMDs).
  • Because your AGI (technically modified AGI) is reduced to the extent of the QCD, you may reduce or avoid any Medicare surcharge on premiums for Parts B and D.

Special rules for QCDs apply to Roth IRAs as well as SEPs and SIMPLE-IRAs. See IRS Publication 590-B (https://www.irs.gov/pub/irs-pdf/p590b.pdf).

2. Deduct out-of-pocket costs for volunteering

If you deliver Meals on Wheels, donate blood, or otherwise volunteer for a charity, you can deduct your unreimbursed out-of-pocket expenses as long as you itemize your personal deductions instead of taking the standard deduction. For example, if you serve on the board of a charity and personally buy postage stamps to mail letters to prospective donors, you can deduct the cost of the stamps. Your driving for charity is deductible at 14 cents per mile, provided you keep records of this driving.

3. Avoid capital gains on donations of stock

If you’re holding appreciated stock that you’ve owned for more than a year, and want to use the stock to fund a charitable donation, consider transferring the shares to the charity instead of selling the stock and donating the proceeds. This way, you don’t have to report the capital gain that would be due on a sale and you still deduct the current fair market value of the shares as an itemized deduction (up to limits tied to your adjusted gross income).

4. Host a foreign exchange student

If you host a foreign exchange student in grades 1-12 in your home under an educational program arranged by a charitable organization, you can deduct up to $50 per month as an itemized deduction. In fact, if the student is in your home for at least 15 days of the month, it counts as a full month.

5. Make a conservation easement donation

If you own property that could benefit the public by preserving green spaces, consider donating an easement to some or all of it. You can still access the property but can no longer build on it or sell it in the future. Assuming you itemize instead of taking the standard deduction, you can deduct your donation up to 50% of your adjusted gross income (with some modifications to this amount). Unused contribution amounts can be carried forward for up to 15 years.

Conclusion

These are not the only ways you can benefit charity and reap a tax break or other financial benefit. You can find more information, including requirements for substantiation and appraisals, in IRS Publication 526. (https://www.irs.gov/pub/irs-pdf/p526.pdf).