The Win-Win in Giving

The holiday season is a great time for giving, meaning it can also be a great time for savings if you file your taxes right. Follow this guide to see the benefits of charitable contributions.

Giving to charity is a reward all its own, but you can recieve a tax deduction award if you file your receipts correctly.

If you are a part of a group or organization that is a non-profit, or donate your time, goods, or money, here is some great news! If you donate you can get a tax deduction or even possibly avoid taxation by unleashing your giving spirit.

Under our current tax code, any itemized deductions above the amount of the standard deduction you can have a higher tax-write-off than average.

Keep in mind that your state income taxes are currently counted towards your itemized deductions as well as mortgage interest. By adding some charitable giving to the mix, most of us can easily exceed the standard deduction limits and be able to itemize instead.

Receiving deductions from your charitable contributions

The IRS notes on their website some of the guidelines for charitable contributions. Here are the main points from their guidelines on charitable giving while getting a tax deduction:

  • Keep great records
  • You can contribute cash or check
  • You can also contribute property or an appreciated asset (but you may need a valuation to be done if it is over $5,000)

I cannot overstate the tremendous implications of having the ability to contribute an appreciated asset. This means that if you have a position with a huge unrealized gain, you never have to realize it. Instead, you can gift it (or part of it) to a charitable organization as is and receive a deduction for doing so. There are some other more specialized strategies that many dentists should consider as well.

For example, you can set up your own foundation or charitable remainder trust (CRT) and donate an appreciated asset directly to your foundation or CRT and get a tax write-off. In the case of the foundation, you can distribute a percentage of the foundation to charities of your choice.

Another charitable strategy that I think is far too under-utilized is charitable giving through required minimum distributions.

Once you hit 70 and a half years old, you have to start taking distributions from your IRA, 401k, or 403b (unless you are still working for a given employer).

Many dentists have very substantial IRAs. As a matter of fact, I have several clients who are required to take $50,000 to $150,000 in distributions every year. These distributions are normally entirely taxable.

However, here’s the good news- if you instead direct part or all of that to a charitable cause (a qualified entity, not a person). You will not have to pay taxes on that part of the distribution.

Take a closer look at your tax return

Review over your tax return from last year and ask yourself the following questions. Did you itemize your taxes or take the standard deduction? How close were you to be able to itemize your deductions? Then, review over Schedule A in your tax return. What itemized line items were you able to take advantage of? How much did you give in charitable contributions? Could you do more and take advantage of the tax code?

For more information on taxes or tax deductions check out the 2018 Tax Cheat Sheet or head over to my blog!

Related Articles

  • How to Get More Bang for Your Charitable Buck
  • Saving Doesn’t Have to be a Burden

Advisory services through Capital Advisory Group Advisory Services LLC and securities through United Planners Financial Services of America, a Limited Partnership. Member FINRA and SIPC. The Capital Advisory Group Advisory Services, LLC (CAG) and United Planners Financial Services are not affiliated.

The views expressed are those of the author and may not reflect the views of United Planners Financial Services. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax, or legal advice. Individual needs vary & require consideration of your unique objectives & financial situation.