Tag Archives: donation

5 Summer Tax Savings Opportunities

Ah, summer. The weather is warm, kids are out of school, and it’s time to think about tax saving opportunities! Here are five ways you can enjoy your normal summertime activities and save on taxes:

  1. Rent out your property tax-free. If you have a cabin, condo, or similar property, consider renting it out for two weeks. The rental income you receive on property rented for less than 15 days per year is not considered taxable income. In addition, you can still deduct your mortgage interest expense and property taxes in full as itemized deductions! Track the rental days closely — going over 14 days means all rent is taxable and rental income rules apply.
  2. Take a tax credit for summer childcare. For many working parents, the summer comes with the added challenge of finding care for their children. Thankfully, the Child and Dependent Care Credit can cover 20-35 percent of qualified childcare expenses for your children under the age of 13. Eligible types of care include day care, nanny fees and day camps (overnight camps and summer school do not qualify).
  3. Hire your kids. If you own a business, hire your kids. If you are a sole proprietor and your child is under age 18, you can pay them to work without withholding or paying Social Security and Medicare tax.
  4. Have a garage sale. In general, the money you make from a yard or garage sale is tax-free because you sell your goods for less than you originally paid for them. Once the sale is over, donate the remaining items to a qualified charity to get a potential charitable donation deduction. Just remember to keep a log of the items you donate and ask for a receipt.
  5. Start a Roth IRA for your children. Roth IRA contributions are limited to the amount of income your child earns, so earned income is key. This can include income from mowing lawns or selling lemonade. Start making contributions as soon as your child makes some money to take advantage of the tax-free earnings available in a Roth IRA.

Taking the time this summer to execute these tips can put extra money in your pocket right away and provide you tax-saving happiness in the future.

Year-End Tax Checklist

As the year draws to a close, there are several tax-saving ideas you should consider. Use this checklist to make sure you don’t miss an opportunity before the year is out.

Retirement distributions and contributions. Make final contributions to your qualified retirement plan, and take any required minimum distributions from your retirement accounts. The penalty for not taking minimum distributions can be high.

Investment management. Rebalance your investment portfolio, and take any final investment gains and losses. Capital losses can be used to net against your capital gains. You can also take up to $3,000 of capital losses in excess of capital gains each year and use it to lower your taxable ordinary income.

Last-minute charitable giving. Make a late-year charitable donation. Even better, make the donation with appreciated stock you’ve owned more than a year. You often can make a larger donation and get a larger deduction without paying capital gains taxes.

Noncash donation opportunity. Gather up non-cash items for donation, document the items, and give those in good condition to your favorite charity. Make sure you get a receipt from the charity, and take a photo of the items donated.

Gifts to dependents and others. You may provide gifts to an individual of up to $14,000 per year in total. Remember that all gifts given (birthdays, holidays, etc.) count toward the annual total.

Organize records now. Start collecting and organizing your end-of-year tax records. Estimate your tax liability and make any required estimated tax payments.

Simple Steps to Make Your Charitable Donation Go Further

These days, we all want our money to go further and charitable donations are no exception. Yet sometimes, even well-intentioned gifts may end up going to a poorly run charity or the charity does not receive the full benefit of your gift.

Here are some steps to ensure that your donation makes the biggest impact:

Research the Charity – Make sure the charity you donate to is a good steward of your resources. Websites like www.charitynavigator.org track the financial health and effectiveness of charities. Effective charities spend 75% or more of their resources on their services and 25% or less on fundraising and administrative costs.

Be Proactive – Identify the causes that are most important to you and your family and then target those organizations – it’s just too easy to give haphazardly to whomever asks you for money.

Do Not Give Over the Phone – Charitable telemarketing campaigns generally use for-profit fundraisers who take a percentage of your gift. This means the charity often receives substantially less of your donation if you give over the phone. If you truly support the organization, hang-up. Then contact the charity directly to make your donation.

Focus Your Support – Focus on one or two charities that you are passionate about. Repeat donations from reliable donors save charities money because they don’t have to go looking for more donors and are not wasting money trying to woo uncommitted, one-time donors.

Share Your Intentions – Whether your donation is a one-time gift or part of a long-term commitment, tell the charity so that they do not continue to spend money on seeking more donations from you.

As part of your holiday season of giving, consider giving to a favorite charity. It can also serve as part of your year-end tax planning.

Tips to Make School Expenses Deductible

It seems like summer has just begun and the Back-to-School advertising blitz has already started. Are there any tax savings opportunities? Certainly, if you are tax smart about your spending. While the amounts may be small, they can add up in a hurry. Here are some ideas:

Purchasing the class supply list could have deductions in it – Often schools send a list of requested supplies for the school year. Some of the items on the list are clearly for personal use (such as an eraser or a ruler) while other items on the list are often for school use and classroom use (such as 24 pencils or paper towels). This classroom supply technique effectively transfers the school expenses to our children. Keep track of these non-cash classroom/school donations for possible non-cash charitable deductions.

Donate funds versus buying the supplies – Instead of buying the classroom supplies yourself, consider providing a check written to the school as a donation. This helps in two ways: First, it becomes a clear cash donation with a canceled check as a receipt. Second, if your school has a good supply agreement, the purchasing power of your donation will go further.

Whenever you donate, get a written confirmation from the school or your child’s teacher representing the school – Most teachers do not have the form, so bring one with you that the teacher can sign. You can get the directions on www.irs.gov or simply use a respected charitable group like Goodwill, or the Red Cross for a format to copy.

Leverage the school’s PTA – This non-profit parent group, if a qualified charitable organization, is a great resource to help your school AND help you get deductible donations for funds you would otherwise provide to your child’s school.

Use checks not cash – If you usually provide donations to the school in the form of cash (like providing additional money to help other kids go on field trips) make those donations in the form of a check. Cash donations without receipts are not deductible.

Donate funds versus taking the raffle ticket – Raffles, subscription drives, and silent auctions are fun ways schools raise funds. To maximize your ability to deduct your donations, forego the possible prize. Then the entire donation is clearly deductible.

Don’t forget your out-of-pocket expenses for your volunteer activities – Perhaps you donate your time at school functions, donate books to the school library, or help assist the teaching staff. Your out-of-pocket expenses and your mileage should be tracked for charitable deduction purposes.

Teachers, save your out-of-pocket expenses – The $250 deduction for qualified educators’ out-of-pocket classroom expenses is a popular tax provision in Congress that is now a permanent part of the tax code.

Finally, don’t forget to review state rules for educational expenses. There are often credits available for out-of-pocket school and other educational expenses.

IRS Announces Dirty Dozen Tax Scams – Part 2

Last week we told you about the three largest of the “Dirty Dozen Tax Scams”. This week we will cover the rest.

Return preparer fraud – In conjunction with Identity Theft, many temporary tax preparation offices set up shop and generate fraudulent tax returns. These folks often file a return using stolen information, create refund fraud and other scams that leave you holding the tax obligation when caught.

Offshore accounts – The IRS has taken many enforcement actions in this area after breaking the long-standing secrecy wall of Swiss bank accounts. If you have money in foreign accounts, you must understand the reporting requirements or you could be subject to substantial fines.

Fake charities – After major disasters, many charitable givers are scammed into making donations to fake charities. In addition, new IRS charitable organization reporting requirements are not being followed by many organizations. This makes donations to them non-deductible. To protect against this, make sure the charity is both legitimate and deemed a qualified charity by the IRS before you donate.

Other scams – The other six scams that round out the IRS list include: inflated refund claims, falsely padding deductions, excessive business credit claims, falsifying income to claim credits, abusive tax shelters, and frivolous tax arguments.

If you want more info, visit the IRS website at www.irs.gov and click on the News & Events tab/Tax Scams!

If You Plan On Claiming That Charitable Deduction, Read This

Donating to charities you support is a very noble thing.  But, if you plan to take a tax deduction for your gift, you must have the proper paperwork.  Assembling the correct documentation can be tricky because the requirements vary based on whether the donation is cash and on the value of your gift.  For example, if you donate less than $250 in cash, a canceled check, credit card statement or similar record may be sufficient.  However, if you give more, you will need a written acknowledgement from the charity.  An additional tax form – and possibly an appraisal – may be needed for non-cash donations (depending on their value).  Lastly, the organization you donate to must qualify as a charity under IRS rules.