Hurricane Sandy roared ashore last week, interrupting our regularly scheduled election already in progress. And yes, I'll be addressing election results shortly, especially as we get more guidance on what to expect for your taxes. But I’m impressed, as always, with how a natural disaster brings out the best in Americans, and I’m pleased to see both Democrats and Republicans joining together to help those most affected by the storm.
The IRS gives generous tax deductions to help make our own generous charitable gifts go further. So this week I’m writing to help you make the most of efforts you might make to support storm victims — or any other year-end charitable gifts.
- You can deduct up to 50% of your adjusted gross income for cash gifts you make to so-called "501(c)(3) organizations," or public charities working on behalf of storm victims. These include the American Red Cross and similarly recognizable groups.
- If you give more than $250 in any single gift, you'll need a written receipt from the recipient, dated no later than the filing date of your return.
- Gifts of food, clothing, furniture, electronics, or household items are deductible at "fair-market value," such as the price you would get for them at a resale shop. Consider using software, available at any office-supply store, for tracking your gifts and their value. You might be surprised at how much you can save!
- Gifts of cars, trucks, and boats are a little trickier. Congress has cracked down on inflated car and truck deductions. If you donate a vehicle, you can deduct the fair-market value only if the charity actually uses it (such as a church using a van to drive its parishioners). If the charity sells the vehicle, your deduction is limited to the amount the charity actually realizes on the sale. And if that amount is more than $500, you'll have to attach a certification to your return that states the vehicle was sold in an arms-length sale and includes the gross proceeds from that sale.
- Donations you make by text message are deductible like any other cash gifts. You can use your phone bill to substantiate your deduction.
The IRS cautions us all to seek out qualified charities, and warns that bogus requests for charities that simply don't exist are common after natural disasters. The IRS also announced that they would give businesses and tax preparers affected by the hurricane an extra seven days to file payroll and excise tax returns that were due on October 31.
December 31 is approaching faster than you'd like, and that means time is running out for year-end tax planning. But it's not too late to take concrete steps to cut your 2012 taxes. What are your year-end financial goals? Helping the victims of the storm? Saving for your dream retirement? Helping finance your children's or grandchildren's education? Odds are good that I can help you save taxes while you do it. And remember, I’m here for your family, friends, and colleagues too!
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