SAN FRANCISCO - Whether you are looking to help out
your favorite charity during the holiday season or just interested
in obtaining more deductions against your adjusted gross income (AGI)
on your 2006 tax return, the holiday season is a great time to make
Some things to keep in mind when considering your year-end
» If you are planning to contribute long-term publicly traded
securities, consider their respective capital gain and loss
positions before you act. If your securities have appreciated,
consider contributing them instead of selling. Donating appreciated
stocks will not subject you to capital gain taxation and the greater
exposure to alternative minimum tax that you could have otherwise if
you had sold the securities. If you have depreciated securities in
your hands, consider selling them and then make a donation of the
sale proceeds. This would entitle you to both a capital loss and a
charitable contribution deduction.
» If you take advantage of the charitable contribution deduction by
making gifts of used clothing and household goods, beware! The
government now allows a deduction only if the donated clothing or
household goods are “in good used condition or better.” It is not
clear what Congress meant by “good used condition or better” and it
is expected that the IRS will be issuing guidance in this area.
» If you are at least age 70½ and an IRA owner, you are allowed an
exclusion from gross income up to $100,000 with an IRA charity
contribution. Just authorize your IRA trustee to directly contribute
the otherwise taxable IRA distribution to a qualified charity before
the end of the year. You may receive additional tax breaks in which
limitations are tied to your level of adjusted gross income.
» For contributions of $250 or less, it is recommended that you make
the contributions by check or credit card, instead of cash. For
contributions of $250 or more, you must obtain written
acknowledgement from the charities before the end of the year.
» Finally, since you will be entitled to a deduction as long as the
contributions are made by Dec. 31, make your contributions as close
to year’s end as possible to maximize the earning potential of your
money throughout the year.
Elizabeth Sevilla is a senior tax director in the San Francisco
office of accounting firm BDO Seidman LLP.
Sevilla, The Examiner
Nov 23, 2006