December means the Holidays, and the New Year, are close at hand. The last thing on your mind might be tax filings due next year. But this is the most wonderful time of the year; to think about saving tax dollars. With that spirit in mind, I will be posting a few yearend tips to reduce your tax burden this filing season.
Do Good by Doing Good
If charitable contributions are a part of your tax reduction plan, be sure to donate cash and non-cash gifts to recognized charities before the 31st of December. If you write a check to your favorite church or other charity by the end of December, you can claim the gift as a charitable contribution on your 2013 tax return. If you are fortunate enough to have some extra income this year, you can give more to charity and save more tax dollars. How much will you save? It all depends on your tax rate. If your tax rate is 15%, then every $1 that you donate will save you 15 cents in tax dollars. If you donated $1,000, you could save $150 tax dollars assume a 15% tax rate.
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You can also donate non-cash items to a charity and receive a donation. If you donated all your unwanted clothing, cars, and household items (it is easier than selling the items on eBay!) to a charity you will receive a donation for the fair market value of the item. The fair market value is basically what the item is worth today, not what you paid for the item. You could clean out your garage, or attic, and save tax dollars as well. However, special rules apply to car donations, so be careful. When you volunteer your services to a charitable you can’t deduct the value of your services, but you can deduct any expenses that you incur while volunteering such as mileage, or materials purchased.
Take the time to get a receipt when you make charitable donations of any kind. The IRS might ask you for proof of the donation. If you don’t have proof of the donation you may be subject to tax, interest, and penalties. A cancelled check is the best way to give cash, and always get a receipt for non-cash donations.
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There are many worthy causes such as, Red Cross Philippine hurricane relief (Redcross.org), Phil abundance (Philabundance.org), and the Whosoever Gospel Mission (Whosoevergospel.org), that there are many opportunities to do good while doing good. If you take the time between now and the end of the year to identify items that you can give to charity, you could save tax dollars and clean house at the same time. That’s killing two birds with one stone! What can you give away to support charity? How many tax dollars can you save?
Brian ford is an MBA and CPA and has been a practicing tax professional for close to twenty years. His practice specializes in tax return preparation, tax planning, and resolving tax problems. He can be reached at (215) 248-3244, or BDFORD@aol.com.
