It’s not time to fill out your tax returns yet, but it is always time to plan for the tax implications of your activities during the year.
RumboughOne item that is very important is the charitable contribution deduction. If you donate used goods to the local Salvation Army, Goodwill, or other organization, it can be quite difficult to determine the value. The tax law states that you may deduct the fair market value of the donated item. There are software programs available for purchase that will help you with this. However, you don’t need to go to that expense. You could go to a local thrift store, or look online at sites such as eBay and Craigslist. The Salvation Army also has a website that offers pricing guidelines. However you do it, be sure to document your efforts. Also be sure that the items you donate are in “good used condition or better.” You may want to also take photos of the donated items.
If you have been on a mission trip this year or are planning to go on one, most or all of your expenses may be deductible. The IRS states that as long as a “substantial amount” of time and funds are spent on the actual mission part of the trip, you can deduct your travel and lodging, meals and supplies that were spent for the mission part of the trip. Be sure to document your expenses and separate them between mission and personal.
If you have large, valuable assets that you would like to deduct but are concerned about letting go of the asset permanently, you may want to consider setting up a charitable trust. This allows you to donate the asset, but still receive income that the asset produces. This will continue until you direct it to stop, which could be your lifetime, the lifetime of your spouse, and up to 20 additional years to your children. Once it stops, the remaining assets in the trust then go to the charity you named when you set the trust up. You get a deduction in the year you establish the trust, although the trust may pay you and your family for many years.
– 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.