In Your Interest – by Valerie Rumbough

Here are some last-minute tax planning tips you may be interested in.

Valerie Rumbough

For charitable contributions, consider giving appreciated stock instead of cash. If you have held the stock for over one year, your contribution deduction will be the fair market value, not what you paid for it. You win two ways here – one, you get a deduction for an amount greater than what it actually cost you, and two, you avoid paying taxes on the gain you would have recognized had you sold it instead. If, however, your stock is worth less and you still want to donate it, sell it first in order to recognize the loss on your tax return, then make the charitable contribution with the proceeds. You are allowed to have up to $3,000 of capital losses that can be an offset to other income, in addition to the amount that would offset capital gain income.

Charitable and other deductible items that are paid for with a credit card in 2010 will secure the deduction, even if you don’t actually pay the credit card bill until next year.

If you have an IRA, you have until April 15, 2011 to make contributions and it still count for the 2010 tax year. This gives you an opportunity to determine what your tax needs are before you decide how much to contribute. If you have thought about transferring funds from your regular IRA to a Roth IRA but didn’t want to incur the income tax liability, now may be the time to do it. For 2010, you can make the transfer and delay paying the tax. You won’t owe any tax for 2010, and you can split the tax due between your 2011 and 2012 tax returns.

Be sure to talk to your tax professional before utilizing any of these tips to make sure they are the best option for you. Happy tax planning!

– Rumbough, CPA, CFP, is chief operations officer with the Baptist Foundation of South Carolina. Contact her at 800-723-7242. In accordance with IRS Circular 230, any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.