Liberty Tax Urges Taxpayers to Reap Tax Benefits for Charitable Contributions as End-of-Year Tax Strategy
VIRGINIA BEACH, Va. --(BUSINESS WIRE)-- Planning time is ticking away for some end-of-the-year tax moves, but during this seasonal time of charitable giving, there are tax advantages for acting before December 31, 2010. Liberty Tax encourages taxpayers to recognize the many ways they can give, and receive tax benefits for 2010 and beyond:
Make Monetary Charitable Contributions and Item Donations: Generally, for individuals, contributions to tax-exempt charitable organizations are limited to 50 percent of the taxpayer's adjusted gross income for the tax year. Taxpayers who have had charitable contributions deducted from their paychecks are required to hold onto their pledge cards from the charity, pay stubs, and their Form W-2 or other employer information that states the total amount of donation.
Those unused items cluttering closets can be donated to a qualified charity or non-profit organization and deducted as charitable contributions. However, these items must be in good, used condition or better. Document your donations by saving receipts, cancelled checks and any letters or correspondence from the charity.
"Many people short change themselves by undervaluing their item contributions," said John Hewitt, CEO of Liberty Tax Service. "Besides items, there are other possibilities, such as stocks."
When declaring the value of donated clothing or items for tax purposes, determine the fair market value. This can be the price the item might sell for at a garage sale or thrift store. IRS Publication 561 Determining the Value of Donated Property is a good source to use. For monetary donations or items over $250 in a single donation, the IRS requires an additional written acknowledgement from the organization. Taxpayers claiming over $500 for all contributed property must complete and file Form 8283, Noncash Charitable Contributions.
Check that your donations are made to a charity or non-profit organization that the IRS considers legitimate. Approved non-profits include those whose focus is religious, charitable, educational, literacy, preventing cruelty to children and animals, or serving military veterans. IRS Publication 78 lists all approved organizations. You cannot deduct the value of your time, but if you're a volunteer, you can deduct your out-of-pocket expenses and volunteer mileage.
Make Donations of Stocks or Make a Charity Your Beneficiary: Besides items, stocks may be a donation to consider with tax advantages. If the stock's value has appreciated, and the taxpayer has held it for over a year, the taxpayer may claim the deduction and not owe taxes on the capital gain realized. When a charity is named as a beneficiary of an insurance policy, the taxpayer may be able to deduct the cash value and premiums of the policy. Taxpayers can also name charities and non-profits in their wills to receive a dollar bequest or percentage of the estate.
Make Donations of Property: Property and securities can be tax deductible contributions when the taxpayer establishes a charitable remainder trust or charitable lead trust. A charitable remainder trust filters the income generated to charity after the donor's death, and the charitable lead trust generates the income for the charity during the donor's lifetime.
About Liberty Tax Service
Liberty Tax Service is the fastest-growing income tax preparation company in the industry's history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns. With 41 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service. The Liberty Tax Service franchise opportunity is #9 on the fastest growing franchise list of the latest Entrepreneur "Franchise 500."