Gift-giving lists may begin to look a lot different this holiday season. With the changing economic climate, lists may shorten as families revert back to Secret Santa exchanges and opt for purchasing one significant gift over numerous ones.
At this time of year, area non-profits are seeking tangible, in-kind, or monetary donations, so The Weekly decided to consult with some local financial advisors for advice of giving, and how it can help your taxable deductions next April.
Edward Jones Financial Advisor Sarah Cizmas suggests the holidays are a good time to be thankful for those charitable, educational, and religious groups that provide our community with valuable services.
“Now may be a good time to consider supporting these groups because, if you contribute before the year is over, you may ‘do well by doing good’ through valuable tax deductions,” Cizmas offered. “To illustrate the benefit of these deductions, let’s assume you’re in the 25 percent tax bracket. If you give $100 to a qualified charity, you can deduct $100 (with a tax benefit of $25) when you file your taxes. Consequently, the real cost of your donation is just $75 ($100 minus the $25 tax savings).”
As you consider your charitable gifts, keep the following points in mind:
• You must donate — not just pledge. You can make a pledge to donate, but the amount is not deductible until you actually pay it.
• You must contribute to a qualified charitable group. For your gift to be deductible, it must go to a qualified tax-exempt organization — either a religious group or a group that has received 501(c) (3) status from the IRS. If you’re unsure if the group you want to support is tax-exempt, just ask.
• You must itemize. To claim a charitable deduction, you must itemize deductions on your taxes.
Raymond James Wealth Management Specialist Frances Strauss agreed that the current economic environment presents enormous challenges for charitable organizations including meeting a growing need for their services. At a time when charitable donations are dearly needed, they have been and are expected to continue declining.
“People that are in a lower income bracket can still give back and have that feeling that they are helping others that are less fortunate than themselves,” Strauss suggested. “They can choose make a donation on either a monthly or quarterly basis so they wouldn’t feel the effect as if they were to give in a lump sum. In this economic climate, we must all budget our monies as to not leave ourselves in a bind.”
* Please remember that state and federal tax rules change frequently. You should always consult with a qualified tax advisor prior to making any decision.