The three best ways to contribute to charity

Cash Donations

Outright gifts of cash (which include donations made via check, credit card, and payroll deduction) are the easiest. The key is to substantiate them. To be deductible, cash donations must be:

• Supported by a canceled check, credit card receipt, or written communication from the charity if they’re under $250, or
• Substantiated by the charity if they’re $250 or more.

This includes not just actual cash but gifts made by check, credit card or payroll deduction. You may deduct 100%.

Stock Donations

Appreciated publicly traded stock you’ve held for more than one year is long-term capital gains property, which can make one of the best charitable gifts. Why? Because you can deduct the current fair market value and avoid the capital gains tax you’d pay if you sold the property. 

Don’t donate stock that’s worth less than your basis. Instead, sell the stock so you can deduct the loss and then donate the cash proceeds to charity.

Gifts of cash are simple and gifts of stock can be tax-smart, but many taxpayers make other types of donations, such as vehicles, collectibles, services, and even use of property.

Unless it’s being used by the charity, you generally may deduct only the amount the charity receives when it sells the vehicle.

IRA Donations

Taxpayers age 70½ or older are allowed to make direct contributions from their IRA to qualified charitable organizations, up to $100,000 per tax year. Note that the age for these qualified charitable distributions (QCDs) hasn’t changed even though the SECURE Act increased the age after which required minimum distributions (RMDs) generally must begin from 70½ to 72. A charitable deduction can’t be claimed for the contributions. But the amounts aren’t deemed taxable income and can be used to satisfy an IRA owner’s RMD. A direct contribution might be tax-smart if you won’t benefit from the charitable deduction.

To ensure you understand the tax consequences of your donations and can maximize any benefits, discuss with your tax advisor which assets to give and the best ways to give them.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
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