With the holiday season in full swing, this is a great time to think about making charitable gifts to the non-profit organizations you care the most about. Plus, with year-end approaching, tax-deductible charitable donations can help reduce the amount of 2013 taxes you'll owe when April rolls around.
Recently, I wrote about how to make charitable donations of shares of stock. This move creates a double-play of tax savings. Here I include some more information on that strategy, but I also include some other ways to get some tax savings out of your charitable donations.
Donate shares to charity
With the stock market at record highs, now is a good time to think about those charitable donations you have been planning to make. But don't take out your checkbook just yet! If you own shares of mutual funds or stocks which have unrealized gains, then consider donating shares to charity, instead of donating cash. The reason is that you'll deduct the market value of the donated shares and neither you nor the charity will have to report the gains.
So if you donate shares which you bought for $2,500 that are now worth over $4,000, you can claim a charitable donation for $4,000. One catch: the shares you donate must have been owned for more than a year.
Clean out your closets
Now is also the time to clean out your closets and collect the old clothes, sporting goods, books, and other household goods that you no longer use and donate them to charity. Just be sure to document these donations by making a list of the items at the time you donate them. Record the worth of those items and you can take that amount as a tax deduction.
Whip out your credit cardFinally, donations made by credit card are deductible in the year they are charged, not the year they are paid. That means you can donate to your favorite charity by December 31 and claim a deduction in 2013 -- even if you pay the credit card bill next year.