’Tis the season for giving. A recent poll by Charity Navigator, an independent nonprofit evaluator, estimates that up to 40 percent of charitable contributions are made at the end of the year. But time is running out to make sure your generosity is both effective and tax-deductible.
Several donations made this year will ultimately not cost you a penny. You can support the working poor through the Arizona Charitable Tax Credit, where you can give to your favorite qualifying charity and reduce dollar-for-dollar what you pay in Arizona income taxes.
Give to a qualifying school through the Private School Tuition Tax Credit or School Tax Credit and get a similar tax reduction. Visit the state of Arizona’s Department of Revenue website at www.azdor.gov/TaxCredits.aspx for more information.
A few tips for the most effective and rewarding end-of-year giving:
Time donations to ensure the deduction is applied in the desired year: Donations are eligible for deduction based on the date the charity receives the donation and you relinquish control of the money. If you deliver a check to a charity or it is postmarked on Dec. 31, 2013, it is deductible in 2013. If using a delivery vendor, such as FedEx or UPS, the charity must receive and sign for the donation by the 31st.
When donating securities, they are typically transferred from your broker to the charity’s broker and must be received by Dec. 31. Credit card donations are very popular, as they can offer tax donation as well as credit card rewards.
A tax deduction is counted on the date the credit card is actually charged. It is very important to contact the charity you are supporting to ensure you are meeting its processing procedures.
Donate appreciated securities versus cash: With the increase in capital gains tax, there may be additional tax benefits for you by donating appreciated stock or mutual funds rather than cash. Usually you are able to deduct the current value of the donation and avoid capital gains.
Verify the charity is eligible and able to accept your gift: Donations other than gifts of cash can be tricky, as some charities do not have the capability to administer other types of gifts. For guidance on this matter, contact the charity directly or your financial adviser.
Consider using a Donor Advised Fund: These funds allow you to take a tax deduction now and distribute the money to charities in the future. They give you the ability to spread your gift to several organizations and provide time to find an organization with a mission or philosophy that aligns with your values.