Doing good may be its own reward, but the tax code offers fiscal incentives.
Here are ways people who claim itemized deductions can boost the amount given for charity.
Giving stock. There's a double payoff when donating stock that's appreciated in value. You get a charitable deduction for the current value and avoid capital gains tax on the appreciation.
Ownership must be transferred by year-end and meet technical rules, so don't delay. Your broker and the charity can help. The process is easiest if it can be done electronically from your account to the charity.
Shares with a loss? Sell them to get a tax loss to shelter other income from tax and give cash from the sale to the charity.
Clear the closet. You can't get a deduction for giving away junk, but clothes and household items in decent shape are deductible at fair market value—what they might sell for used. Under new rules, a deduction isn't generally allowed for items not in good shape or better, emphasizes IRS spokesperson Peggy Riley.
Cars. You can still get a deduction for giving one to charity. But the IRS, stung in the past by cream-puff valuations on clunkers, is picky about the amount allowed. You generally can't deduct more than the charity gets for the car if it disposes of it. But the specific deduction on a donated car can be tricky depending on how the charity handles the vehicle. Charities accepting cars can provide help on valuation and paperwork.
Tapping an IRA. This is the last year, unless extended, for a provision that lets people 70½ or older directly transfer up to $100,000 of otherwise taxable money from an IRA to a charity and not have to count the withdrawal as taxable income.
Because the withdrawal isn't taxable, there is no charitable tax deduction. But the transfer can avoid adverse tax twists that may occur if you personally withdraw the funds and then contribute them.
Give now, pay later. Responding to appeals this month will lift 2007's charitable deduction, and you can even avoid an immediate out-of-pocket expense. Donations put on a credit card are deductible for 2007 even if the charge isn't paid until next year. Checks mailed by year-end are deductible this year.
Cash? Though audits on the issue are likely to be few, the IRS now expects you to be able to produce a canceled check, credit card statement, or other confirming receipt—not just a note to yourself—to document any cash donation, no matter the size or how it's given.