If you did spring cleaning in 2012 you can also take advantage of this tax benefit and save on your 2012 taxes.  Let’s look at the types of items you might like to donate.

Household Goods such as furniture, appliances, etc, must be in ‘good used condition’ or better, and you must have a written acknowledgement from the charity for any donations of cash or property worth more than $250. Your old set of cutlery, cookware, or dishes may not seem valuable to you, but agencies helping people get off the street or away from an abusive relationship are looking for these things to set people up in a new apartment.

Used Clothing is also in strong demand in nearly every area of the country. Be careful not to over value it, keeping in mind that the IRS tells us “the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value.” TurboTax ItsDeductible will help value your donated items.

If you plan to donate Jewelry or Gems to a qualified charity, perhaps to help them out at their annual auction, you should have a written appraisal from a specialized jewelry appraiser. The lucky guy or gal that bids on your treasure might have a donation of his or her own, but only to the extent their winning bid exceeded the appraised value of your donated jewelry.

Donations of art valued at over $5,000 must be supported by a written appraisal which you should keep with your records. If over $20,000, the IRS would like to see that appraisal attached to your return along with an 8 x 10 inch color picture of the donated art.

Cars and Boats are valued using pricing guides for private party sales, and should be reduced if the car has any damage or excess wear. If the donated car is sold by the charity, you can only deduct what the charity sold it for. What the charity does with the car may impact the deduction you can take, Publication 526 offers a comprehensive set of guidelines for how to value your deduction.

Stocks and Bonds can also be donated directly to charity and there’s a bit of a double bonus in doing so. Say you’ve owned a stock for a long time and its value is many times its original price. By donating the stock to a charity, you get the tax deduction, based on your marginal rate, but you also get to avoid the capital gain on those shares. For those who have significant donations they are making each year, this is a nice strategy to maximize your charitable giving.

I shouldn’t miss mentioning that The American Taxpayer Relief Act of 2012 (what congress passed to avoid the fiscal cliff) extended the Qualified Charitable Distribution for 2013. This means that if you are 70-1/2 or older and taking Required Minimum Distributions (RMD) from your IRA, you can direct the custodian, the bank or broker, to send funds directly to a charity of your choosing. It’s consider part of your RMD, but isn’t taxed. For those who don’t itemize, it has the effect of saving you the same on your taxes as if it were a deduction included on your return. Even if you do itemize, it may still provide a bit of a benefit by not appearing as adjusted gross income.

I hope these Spring Cleaning ideas can help make some room in your house and lighten your tax bill next year.  Don’t forget, if you did spring cleaning in 2012 you can take advantage of these tax deductions when you file your 2012 taxes.  TurboTax will ask you the proper questions so that you can keep more of your hard-earned money.

Mortgage Interest Deduction

That big fat mortgage payment you now have to pay every month has an upside. The interest portion of every payment is tax deductible.  Keep in mind that, at the beginning of your mortgage, most of your payment is interest, meaning that the overwhelming majority of your payment is tax deductible.

Real Estate Tax Deduction

Every dollar you pay in real estate taxes is deductible.  While it’s never fun to learn that your property taxes have gone up again, at least you will be able to take some solace in knowing your tax deductions (and your resulting income tax savings) will increase at the same rate.

Charitable Donation Deduction

While the charitable donation deduction might seem unrelated to a home purchase, this is income taxes we’re talking about.  Before you purchased your home, you may not have had enough tax deductions to itemize your deductions.

Why?  Since your standard deduction was greater than your itemized deductions, you did not benefit from any of the itemized deductions you could have otherwise taken.  But when you became a homeowner, the mortgage interest and real estate taxes alone often make it so that you will be able to itemize and you are now eligible for additional tax deductions. The most common of these is the charitable donation deduction. So, if you tithe at church or give clothes to the Vietnam Veterans, you will now also receive a tax benefit from doing so.

Other Considerations for First Time Home Buyers

Save your closing form (HUD).  When you file your tax return for the first time after buying a home, additional expenses incurred on your HUD may be deductible, including prepaid interest (points) you pay at closing.

Save all of your home improvement receipts.  You are likely to sell your home one day.  Most home sales do not result in income tax.  However, it is possible if you move very quickly or make a very big profit. To lessen the odds you will owe capital gains taxes on the sale of your home, save your receipts!

Welcome to the world of home ownership. It can be wonderful and expensive. Make sure you take advantage of every opportunity to keep your costs in line.  Start with taking maximum advantage of the tax deductions available to you.

Don’t worry about knowing all of these tax deductions, TurboTax will ask you simple questions, and give you the tax deductions you’re eligible for.  If you have questions, only TurboTax lets you talk to CPAs, Enrolled Agents, and tax attorneys while you prepare your tax return, free.

Here are some ways you can make a difference this year and beyond.

Small Gifts Throughout the Year

Sometimes we feel bad that we can’t give what we want to worthy causes because of our limited budget. If giving a large donation would wreak havoc on your budget, perhaps you can spend the same amount, but over the course of the year. There are many charitable organizations that offer small subscription plans.

While you may not think your contribution is much, most organizations could use that money for many projects throughout the year.

• Camp Sunshine: Camp Sunshine offers children with life threatening illnesses and their families a retreat from the strain and toll that these diseases can cause. Services given at the camp include medical, counseling, accommodation  and meals. The camp also offers families recreational activities.
• Feeding America: With a network of over 200 food banks around the country, this hunger-relief charity maximizes your donations. For every dollar you give, it will go towards getting $8 worth of food to someone in need.

Helping Out With Your Skills

Of course while money is certainly appreciated when it comes to giving, it is not the only thing you can do to help your charity. If you have some skills or even just some time available to share, you can do much good in your community. Not all organizations advertise that they need help (they may lack the resources to get the word out), so feel free to contact a local office to see if there is a need that you can fill.

For example, if you have some basic web design skills, perhaps you can donate your time to update the charity’s website. Or perhaps you can help with administration work that would free up time for the full time members to take care of the day to day operations.

Thoughts on Giving

Besides helping others, you may also get some tax benefits with your charitable donations. How many of you are planning on giving more to charity this year? How do you prefer to give? What organizations are dear to your heart and why?

1. Make a Gift-giving Budget and Stick to it. As a couple, you should set expectations to how much you each will spend on gifts for one another. Whether you want to splurge on your sweetie or show how much you care with a DIY gift, make sure to set a budget and expectations so there’s no disappointment come Valentines day.

2. Give from the Heart and Hearth. Happy memories come these special times, not from spending a lot of money on this day. Bake cookies, knit a scarf or make a personalized scrapbook. A handmade gift or baked goods tells your significant other you invested time (not to mention love) in the gift – and that makes it priceless!

3. Gift Wisely. You are spending your hard-earned cash, so be sure that your honey is getting something they value. Instead of giving flowers and chocolates, try giving something they could use like a piece of technology or something they’ve wanted. They’ll surely love that more than the calories from the sweets they normally receive.

4. Dine In. This may be the national day for spending a fortune on a fancy dinner out on the town, but you shouldn’t shy away from staying home with your Valentine. They’ll not only appreciate a home cooked meal, but you can also save quite a bit by preparing dinner yourself.

5. Donate to a Cause – and don’t forget the tax break! Make a donation to a charity close to your Valentine’s heart. Not only will it be a meaningful gift, you’ll also get a quick tax deduction to boot.

       1.  Holiday decorations, flowers and food. If you throw a big extravaganza holiday party with elaborate ornaments and decorations, you’ll likely have food left over after the guests leave. Take the leftover food, flowers and reusable decorations to a homeless shelter, women’s center or similar non-profit organization.  Not only will you have done a good deed, but with a receipt, you’ll be able to take a tax deduction on this year’s tax return for the value of the items donated.

       2.  That special holiday dress. If you bought a dress to wear at a special holiday event, after it’s over consider donating your clothing to a non-profit organization such as Goodwill or a homeless shelter. Or you can sell your special dress on eBay, Craigslist or through a consignment shop, and donate the proceeds to charity.

       3.  Toys.  Many local charities have toy drives this time of year, to obtain gifts to give to children in need. Keep your ears open and drop off the items at the designated spot, or seek out the U.S. Marine Corps Reserve Toys for Tots Program (www.toysfortots.com), or ask for information at your local toy retailer.

       4.  Donate canned and boxed food. If you have boxed or canned food that is languishing in your pantry, each December toss the cans, bottles and boxes into a paper bag and take the bag to the drop-off point at your local grocery store. You’ll be helping a family in need and cleaning out your pantry, all at the same time.

        5.  Clean out your closets and donate to charity the old clothes, sporting goods, books, and other household goods that you no longer use. You will welcome the New Year with new space in your life, and get a quick tax deduction to boot. Document these donations by making a list of the items at the time you donate them. And don’t forget to include those holiday gifts from seasons past that you didn’t use and pushed to the back of the closet.

        6.  Take a tax deduction if you can. To garner a tax deduction for donations the property donated needs to be in usable condition, and establish its fair value. For most clothing and household goods, that’s the thrift shop value. You can use TurboTax ItsDeductible to determine the value for most household items.  You’ll also need a signed receipt that proves you made the donation.

Carlos was moved to the wounded warrior battalion where he worried every day about how he would support his family once he was medically retired. His wife, Patricia, was laid off soon after. Not only had Carlos fought for his country, he now faced a real financial battle at home.

Carlos isn’t alone. There are tens of thousands of U.S. service men and women just like him who need help to get back on track.

That is why TurboTax and Operation Homefront have launched Mission2Match, a cooperative fundraising effort to support troops and their families facing money emergencies. Operation Homefront is a charitable organization that provides emergency financial support and assistance to America’s service men and women.

In fact, Carlos and his family turned to Operation Homefront when they had nowhere else to go. Operation Homefront helped his family find a safe place to live, financial assistance to make ends meet and make a plan for their future. “If it weren’t for Operation Homefront, it wouldn’t be good at all,” Carlos said. “This is a blessing and then some.”

And now you can lend a hand to those who serve our country! We’re asking you to join us in supporting our troops. In fact, we’ll match donations up to $1 million, for donations made now through April 15, 2013.

How to give

TurboTax Online customers will be given the opportunity to donate from within the product after they’ve completed their taxes. Donations can be made now at http://www.mission2match.com. Only donations made through the Mission2Match campaign are eligible for matching. Donations will be matched a second time when donors tweet with #mission2match via Twitter and share the opportunity to give with their social network.  Your $5 donation could potentially become $15.

We hope you’ll join us in supporting Operation Homefront military families and wounded warriors who have given so much.

charitable contributions

Charitable Donations Can Be Tax Deductible

On the other hand, when you give to charitable organizations, a tax deduction might be available.  As long as your gifts are given to 501(c)(3) organizations, charitable donations to them are deductible to the extent the value you give exceeds the value you receive.

A couple of examples will help explain.

Example 1:  If you donate a check for $100 to your church as part of a fundraiser and, in exchange, receive a ticket to a dinner with a value of $30, your charitable donation is $70. ($100 value donated less $30 value received).

Example 2: If you give clothes that cost you $500 to an organization, such as Goodwill Industries, that are worth $100 at the time of the donation, your potential tax deduction is $100.

Don’t worry about trying to figure this out.  TurboTax ask you simple questions about your donations and helps you figure out your tax deductions.  In addition, you can use ItsDeductible to value and track your donations.

Business Gifts and Tax Deductions

Run a small business? If you give gifts to business associates, you can deduct part of the cost of that gift.  That’s true even though the associate is likely another person or company – not a 501(c)3 organization.  Furthermore, you can give and deduct as many business gifts as you like. However, the amount of the tax deduction is limited to only $25 per gift recipient per year.  So, if you give five $50 gifts to five different people, your total tax deduction is $125 (5 different individuals multiplied by the $25 maximum per recipient.)

Are Gifts You Receive Taxable?

While it may seem like the government taxes everything, gifts you receive are not taxable.  So enjoy the rare tax-free income.

Things that are outdated or faded and limp or that no longer fit? Don’t pack them away for next spring, give them to charity now. That way someone else will enjoy them and you’ll get a big fat tax deduction for 2012.

Get Organized

The limits for how much you can donate to charity don’t affect many of us. The deduction is limited to 50% of your income, and donations of property to certain organizations, such as veterans’ organizations, fraternal societies, nonprofit cemeteries, and certain private non-operating foundations, or to be used by an organization, are limited to 30% of your income. Unless the stuff in your closets is really, really valuable, those limitations probably won’t impact you.

To get a tax deduction for donations, you must itemize your deductions. That means your eligible tax deductions, must exceed the IRS standard deduction (in 2012, $5,950 if you are single, $11,900 if married, and $8,700 if head of household).

This could be a plus since you have a way to increase your tax deductions greater than the standard deduction and get a bigger tax refund by donating to charity.

To take a deduction for property donated, it must be in usable condition, and you must establish its fair value. For most clothing and household goods, that’s the thrift shop value. You can use TurboTax ItsDeductible to determine the value for most household items.  You’ll also need a signed receipt that proves you made the donation.

Maybe you, like me, are in need of a new car. With interest rates at historic lows and auto dealerships anxious to make a sale, the fall is an ideal time to shop. If the dealer won’t give you much for your car, consider donating it to charity.

Your deduction is limited to the amount that the charity gets when it sells the vehicle, but you will still be able to increase your tax deductions and your tax refund through giving.

Charitable donations

Fortunately, Uncle Sam has the same idea and if you do things right, you can clean out your home and get a nice tax deduction for your trouble when you file your taxes. As you go through your home and clear out your clutter, don’t forget the less fortunate. After all, what you don’t want cluttering up your home can be a treasure to someone else – and a tax deduction for you.

Remove Clutter from Your Home

As you do summertime cleaning, keep an eye out for items you don’t use anymore. Will you seriously use that exercise bike? That old sports equipment? Do you have clothing that you don’t wear anymore? Books that you are slowly replacing with electronic versions? All of these items can be donated to a local thrift store or other charity organization.

Removing clutter from your home can provide you with the chance to carefully consider your relationship with stuff, downsize some of your lifestyle, and create more space in your house. To make the process more manageable, concentrate on one area at a time, breaking the task down into smaller pieces.

I like to put little used items into a box. If I don’t touch the items for the next month, or two or six, I just take the box out to Goodwill and make a donation. If I don’t use something for six months, chances are I won’t use it ever again.

Donate Your Clutter for a Tax Deduction

As you clean your home, consider the condition of your items. If you want a tax deduction, the items you donate must be in good condition. Be honest about each item, setting aside the items in good condition for donation, and preparing the items in poor condition for disposal (recycling if possible). Keep track of the market value of the items you plan to donate.  You can use ItsDeductible to track the value of your charitable donations year-round.

When you take your donation to the charitable organization, ask for a receipt. In order to deduct the value of donated goods, you need to document details of the donations. Some organizations will only issue you a receipt if you ask for it, so remember to ask because you are required to have a receipt for your charitable contribution.

File the receipt in a folder meant for tax documents. That way you will know right where your documents are and you won’t have to worry about trying to find the receipt at tax time.

Lastly, you can claim the deduction if you itemize your deductions and you’ll get a fraction of its value as a tax deduction, depending on your tax bracket. If you claim the standard deduction, you won’t be able to get a tax deduction for charitable donations.

Summertime can be a good time to remove clutter, providing you with an orderly home. On top of that, you can also help others. Donating your goods can help a charity by providing needed supplies, or provide items for sale in a thrift store to fund charitable activities. Not only can you help others, but you can also help yourself with a tax deduction. You can deduct the dollar amount of the value of your donated goods, resulting in a reduction in your tax liability. Your new beginning can help you at tax time, and provide a new beginning for others.

Weddings

Charitable Donations

While it is your special day that you’ll never forget, have you thought of how you can make it a special day for others by donating? For many people, their wedding wardrobe, decorations, and other items are only used for one day and then packed away, sometimes forgotten in the attic. Why not see if you can part with a few of these dear items afterward and support worthy causes close to your heart?

Wedding Dress, Flowers, and Food

While you won’t get a tax deduction for buying your wedding dress, you can donate it and deduct it as a charitable contribution, provided it’s to a qualified organization. Make sure you keep all receipts and documentation for when you file your taxes. Please note, if the value of the items you’ve donated is more than $5,000 you must also get an appraisal.

If you think you may have plenty of food leftover from the reception, consider having someone take it over to a local homeless shelter. Ask them to get a receipt if possible. You could also donate the reception flowers to the shelter – it can brighten others’ day along with giving you a deduction.

Wedding Venue

Where you get married may mean that your venue payment could be tax deductible. Some possible locations to consider on your list of places to tour include your church, state park, or your local museum. Check with your venue to see if you qualify.

Thoughts on Weddings and Tax Breaks

Of course your wedding day planning shouldn’t just be focused on getting the most tax deductions you can; however it doesn’t hurt if you can do some good and get a tax break.  Also, don’t forget if you give any generous donations, you can track them with ItsDeductible year round.

I’d love to hear your thoughts. How many of you are getting married this year? Have you decided on the venue, the dress, and the guest list yet? What tax deductions do you think you’ll qualify for?

Charitable Travel

First, you have to know whether or not the organization you volunteered for was a qualified organization. No matter what you gave, be it time or money, the IRS only allows you to deduct when it’s been given to a qualified organization. The good news is that most public and non-profit private organizations are qualified, but it is up to you to find out if you aren’t sure.

Now when it comes to travel incurred while volunteering there are a few things to consider. First, the IRS says that generally you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. The good news here is that most travel expenses will qualify, but keep in mind that you can’t turn one way of volunteering into a week-long vacation with the family and expect to write off all the airfare and lodging costs.

Deductible Travel Expenses

Most common expenses related to travel are allowed. Here is what the IRS defines as deductible travel expenses:

• Air, rail, and bus transportation,
• Out-of-pocket expenses for your car,
• Taxi fares or other costs of transportation between the airport or station and your hotel,
• Lodging costs, and
• The cost of meals.

When it comes to using your own car for travel you can do one of two things. You may deduct the actual cost of gas used to get to and from the volunteer site, or you can deduct the IRS standard rate of 14 cents per mile. Unlike using your personal car for business, you cannot deduct expenses such as insurance, maintenance, or depreciation.

As always, it pays to keep detailed records regarding all expenses related to the trip. You may need to substantiate your expenses so keep a log of the miles driven, keep all receipts for meals and lodging, tolls or parking, and anything else related to your time volunteering.

As long as an individual meets certain criteria laid out by the IRS, this strategy will offer hefty tax savings for individuals and much-needed cash for numerous charitable organizations.

Qualified Charitable Distribution

Tax Law Timeline

The Pension Protection Act of 2006 allowed taxpayers age 70 1/2 and older to exclude from their gross income what would otherwise be taxable distributions from their IRA if they were paid directly to a charity.

This law has been extended for the last 4 years, and is currently extended through December 2011 by the Tax Relief Act of 2010.

This tax legislation extends Qualified Charitable Distributions – an IRA distribution paid directly to a charitable organization from IRAs – through the end of this year. QCDs are excluded from the taxpayer’s gross income for federal tax purposes and may be counted toward an individual’s Required Minimum Distribution (RMD) if those minimums have not yet been satisfied.

Guidelines to Determine Qualified Charitable Distributions

• Individuals must be 70 1/2 years of age or older when the contribution is made.
• Contributions must come from traditional or Roth IRAs. According to the IRS, QCDs cannot be made from employer-sponsored IRAs (Simplified Employee Pensions; SEP-IRAs), Savings Incentive Match Plans for Employees (SIMPLE-IRAs), or from defined contribution retirement plans (for example, 401(k) plans or 403(b) plans).
• Charities receiving the contribution must be eligible to receive tax-deductible charitable contributions; 501(c)(3) organizations. This seems rather obvious, but you need to be smart and research the charity prior to your donation.
• The maximum QCD is $100,000; however, a spouse can also make a $100,000 qualified charitable distribution within the same year if the couple files a joint income tax return.
• The $100,000 max limit doesn’t apply to the overall charitable deduction limit. Therefore, individuals are able to make charitable contributions in excess of 50% of their adjusted gross income.
• The distribution must be a “trustee-to-trustee transfer”. This means that the money doesn’t touch your bank account; instead, it goes directly from your IRA account to the charity that you have chosen. A distribution to a recipient other than a charity will not be tax free, even if that recipient donates the money to a charity.
• Qualified distributions for 2011 must be made by December 31, 2011.

Benefits of This Extension

There are three major areas of benefit when dealing with this tax-free extension.

First, the extension gives an incentive for individuals over 70-1/2 to donate. These incentives could possibly be a deciding factor for many people considering what to do with their IRA distributions.

Although the individuals get a tax break, extending this tax legislation benefits charities who are in need of donations by making it easier and cheaper for donors to give. Remember, charities need funds to continue doing good work around the country and around the world.

Second, the tax relief extension benefits the donor by allowing the exclusion of up to $100,000 of the the QCDs from their gross income in 2011. This is the tax-break highlight of the program extension, especially for this last month of the year.

Third, for those of you who have Required Minimum Distributions, QCDs satisfy RMDs that you would normally be forced to receive from your IRA, just as if you had received an actual distribution from the plan. This means your RMD will satisfy your required distribution amounts as well as give you all of the tax benefits of a qualified charitable distribution.

However, you do not get to deduct QCDs as a charitable contribution on your federal income tax return. That’s double dipping.

Why This Extension Is Important To You

Typically, deductions for charitable cash contributions are limited to 50% of a taxpayer’s AGI. Individuals who want to make a large charitable donations above that limitation are able to do so under this extension.

This is an important tool because the QCD’s exclusion from an individual’s gross income provides a solution for making charitable deductions for taxpayers who are not able to itemize their deductions (i.e. they take the standard deduction).  If you are a taxpayer over 70-1/2, who is lucky enough to have a paid off mortgage, you may not be lucky enough to itemize your deductions since mortgage interest usually plays a big part in you being able to itemize deductions.  If this is the case, paying qualified charitable distributions directly from your required minimum distribution(tax-free) will greatly help your tax situation.

Other areas of importance are that the extension makes this process less time consuming and less expensive. Without utilizing this tax-free extension, an individual would see an increase in paperwork and a decrease in benefits.

Who Should Make Qualified Charitable Distributions?

Typically, there is a limit of 50% of an individual’s Adjusted Gross Income that is available for charitable deductions. Taxpayers who want to make a large charitable donation above that limitation are ideal candidates to benefit from the QCD extension.

Another possible candidate might be someone who desires to make a large charitable donation, but their only financial vehicle is a large IRA balance. In this situation, if the individual took a normal IRA distribution outside of the tax-free QCD extension, they would be subject to fees, taxes, and a litany of other possible consequences (including an increase in taxable Social Security income or a rise in Medicare Part B Premiums).

Other individuals might simply want to donate their entire RMD and still enjoy the tax benefits by making the contribution through the tax-free QCD.

Remember, qualified charitable distributions for 2011 must be made by December 31, 2011.  If you decided to make this thoughtful charitable contribution, it will be indicated on your Form 1099-R.  Don’t worry,  TurboTax will easily guide you to enter the necessary information from your qualified charitable distribution.

Charitable Donation

What is a Tax-Deductible Charitable Contribution?

When you give a dollar or two to a man on the street, it might feel like charity. Heck, it probably meets the English definition of charity. But from the IRS perspective?  It’s a gift.  While that means the recipient of your generosity won’t need to pay tax on the gift, it also means you can’t deduct the amount you gave away either.

Only gifts to 501(c)(3) organizations are tax deductible. You can check to see if the organization you are going to make a donation to is a 501(c)(3) organization at the IRS web site. In short, you must give to a registered non-profit organization (not individual) which operates as a true charity.

Who Can Deduct a Charitable Donation?

If you make a charitable donation to a qualified charity, you can only deduct the contribution if you itemize. Said another way, those who take the standard deduction will not realize any tax savings as a result of their generosity.

On the other hand, those who itemize can take sizable write-offs for their contributions. An itemizer in the 25% tax bracket who makes a $200 donation will see his or her taxes reduced by $50 ($200 deduction x 25% tax bracket). Consequently, while the charity receives the full $200, the donor is really only out $150 ($200 contribution less the $50 in tax savings).

Donating Cash vs. Donating Stuff

When you write a check, charge a donation, or simply provide cash to a charity, the amount of your potential deduction is easy to determine; it’s simply the amount you contributed.  Sometimes, however, you might donate household items, such as old clothing or furniture.  In that case, things are not so straightforward. Instead of being able to deduct what you paid for the items donated, you are limited to the amount they are worth.

A reasonable estimate, usually based on what you could get for your items at a thrift shop, is sufficient.  When you use TurboTax, the ItsDeductible feature will accurately value your donations in compliance with IRS guidelines to maximize your tax savings. No matter whether you donate cash or goods, be sure to get a receipt.  If you donate something worth more than $250, a receipt is required.

Did the Charity Give You Anything?

If you receive something in exchange for your donation, like a nice meal or a gift card, you can only deduct your contribution to the extent it exceeds the value of what you received. So if you make a $150 donation to a charity which then provides you a meal valued at $50, your tax deduction is $100.

Fortunately, most charitable organizations provide you with a summary of the tax deductible amount of your contribution when they send you a letter thanking you for your generosity.

Timing Your Donations

While charities need money throughout the year, many dramatically increase their recruiting efforts towards the end of the year. Part of that strategy is undoubtedly to appeal to sentiments during the holiday season. But another force is at play: taxes. Because tax deductions are aggregated on a calendar year basis, many donors make their largest donations at the end of the year.

A donation made in late December means tax savings on a return due less than four months later.  A donation made in January doesn’t hit the income tax return for the donor until nearly 15 months later.  Which would you choose?

While you shouldn’t allow potential tax savings to determine whether or not to be generous, it will always make sense to be mindful of the opportunities provided by appropriate charitable tax planning. After all, the more you save when you donate, the more you can afford to donate again sometime later.

A weak economy has many people feeling more cautious than ever.  As a result, 7 out of 10 of us (68%) will be “giving” more sparingly to our favorite causes, according to a study by Campbell Rinker.  Another 1 in 10 Americans plan to stop giving altogether until the economy gets back on track.

The good news is there are plenty of ways to be charitable without actually dipping into your pocketbook.  All you have to do is shop more thoughtfully, and “doing good” can easily be a part of your everyday life.

Here are some options:

Shop Your Closet

Have a couch that no longer matches your living room decor?  Gently worn clothing that is cluttering up your closet?  A television set that you’re not using?  As long as your “stuff” is in good or better condition, charities will be pleased to take it, and you’ll be rewarded with a nice little tax deduction come tax time.  To determine your item’s fair market value, use ItsDeductible, a free online site from TurboTax.  It’s free, easy to use and it imports directly into your TurboTax return.

Shop Online

A site called GoodShop.com makes giving a cinch.  Anywhere from 3% (on average) to as much as 30% of each purchase you make on this shopping portal – which is affiliated with over 2500 name brand retailers from Amazon, Toys ‘R Us, Target, to GAP, and Petco – is donated to your favorite charity.  Simple as that.

Change Your Search Engine

Every time you do a search on GoodSearch.com, a Yahoo-powered search engine (that you use as you would any other search engine), one penny is donated to your favorite cause.  And those pennies add up:  the ASPCA, to name one, has already earned over $34,000 from searches by its supporters.

Shop Smart

Put your funds to work when you shop by buying from one of the many companies that donate part of their proceeds to a noteworthy cause.  Lots of them do – from Estee Lauder, Kiehls, The Body Shop, Tom’s Shoes, Dancing Deer Baking Company to Newman’s Own.

Buy and Sell on eBay

Support your favorite causes through the eBay Giving Works program.  Sellers:  Choose the charity and the percentage of the sale you’d like to donate when you list an item.  The listing will automatically be indexed for buyers wanting to give to the charity that you have selected.  Buyers can also search for items by charity in order to ensure that their bids support their favorite causes.

Apply Credit Card Points

See if you can convert your credit card points into a charitable donation.  The Members Give program at American Express (amex.justgive.org), for example, allows its customers with points-based rewards cards to redeem these points as a donation to any of the charities listed on GuideStar.org (there are over a million to choose from).  Charities get $10 for every 1,000 points you redeem.

Game for Good

Give to a good cause by playing social games that drive donations to various charities.  TurboTax has a Facebook game, “Gaming for Good“, which is designed to generate holiday toy donations for Toys for Tots.  Successfully complete all three levels of the game and TurboTax will donate one toy to a child in-need.

What is Gaming for Good with TurboTax and Toys for Tots?  It’s an easy to play game on Facebook that TurboTax created to donate holiday toys to Toys for Tots.  With three levels, we will test your memory by asking you to pair together images of varying tax deductible items.  And when you successfully complete “Gaming for Good”, TurboTax will donate one toy to a child in-need.  Essentially, you play and we give!  Easy, right?

We think every kid deserves to experience the magic of the holidays, but we can’t accomplish our goal without you.  Help us spread the word by doing the following:

• Game on!  Click this link to start playing!
• Facebook it!

o  Share this blog post on your Facebook wall

o  Invite your friends to play Gaming for Good with TurboTax and Toys for Tots

o Status tag your most competitive friend with your high score and challenge them to beat it.  Friendly (or not-so-friendly) rivalries encouraged.  After all, it’s for a good cause!

• Tweet it out!  Share this blog post with your Twitter followers.

Happy gaming!

Annual deduction limitations

Although there is no limit on the number of cars you can donate, the IRS does limit the amount of your total charitable contribution deduction each year. Generally, you can deduct the value for all vehicles you donate if the total does not exceed 50 percent of your Adjusted Gross Income (AGI). If you have insufficient AGI to claim the full value of your donations in the current tax year, you can deduct the excess in any of the next five tax years.

Valuing your car donations

Unlike other property you donate to charity, the IRS imposes more restrictions on how you can assess the fair market value of a car. It requires you to reference a used-car price guide when assessing value. There are multiple guides you can use; however, you must reference one that considers the vehicle’s make, model, year, mileage and condition in its price assessment. In addition, taxpayers may only use the private-party sale prices rather than the price a used-car dealership charges for similar vehicles.

Documenting your car donations

For each vehicle that you value at more than $500, you must deduct the smaller of its fair market value or the gross proceeds the charity obtains in a subsequent sale. Charitable organizations that accept used vehicles must provide you with a Form 1098-C that reports the proceeds of the sale. When the organization sells the vehicle for $500 or less, the IRS limits your deduction to the smaller amount — either $500 or the fair market value of the vehicle on the date of contribution.

Reporting your car donation deduction

To claim the charitable contributions deduction for your cars, you must be eligible to itemize your deductions by incurring total deductible expenses during the year that exceed the standard deduction amount. If eligible, you must include all charitable donations on the Schedule A attachment to your personal income tax return. You must also complete an IRS Form 8283 if any single donation results in a deduction of $500 or more. The IRS imposes severe penalties on taxpayers who grossly overvalue their vehicle donations. If you report a car value that is 150 percent or more of its true value, you may incur a penalty of 20 percent calculated on the underpayment of tax that directly results from the overvaluation. The penalty increases to 40 percent for values that are 200 percent or more of actual value. The IRS provides a guide for determining the value of donated property.

The limits for how much you can donate to charity don’t affect many of us. The deduction is limited to 50% of your income, and donations of property to certain organizations, such as veterans’ organizations, fraternal societies, nonprofit cemeteries, and certain private non-operating foundations, or to be used by an organization., are limited to 30% of your income. Unless the stuff in your closets are really, really valuable, those limitations probably won’t impact you.

But here’s a limitation that will apply to you: to garner a tax deduction for donations, you must itemize your deductions. That means your eligible medical expenses, long-term care expenses, interest, taxes, etc. must exceed the IRS standard deduction (in 2011, $5,800 if you are single, $11,600 if married, and $8,500 if head of household).

To take a deduction for property donated, it must be in usable condition, and you must establish its fair value. For most clothing and household goods, that’s the thrift shop value. You can use the TurboTax Its Deductible to determine the value for most household items, and get tips from the IRS on charitable deductions. You’ll need a signed receipt that proves you made the donation. Watch this quick video about deducting charitable contributions if your prefer a visual guide!

This year I’m thinking about donating a car to charity, but I haven’t made the final decision. Giving a clunker charity used to be straight-forward. Find the value in the Kelley Blue Book or other valuation service, ask a friend to help you deliver the car to the charity, then drive off with a tax break.

But now car donations are somewhat more complicated. Instead of establishing the value yourself, your deduction is limited to the amount that the charity gets when it sells the vehicle. So what you thought would be a $2000 deduction, based on Blue Book value, turns out to be only $1500 if that’s all the charity can sell the vehicle for. That puts you in the peculiar position of not knowing the amount of your deduction until after you make the gift.

Just like other deductions, your gift doesn’t reduce your taxes dollar for dollar. So a $1500 donation may save only $300 to $500 in taxes. And there’s my dilemma: go though the hassles of fixing up my car and selling it, or take the easy more generous route of donating it and getting a tax deduction. I still haven’t decided.

Play it safe by searching for 501(c)(3) organizations on the IRS’s publication 78, available at irs.gov.), and while many will happily accept everything from your vacation home to your commercial property, here are the three most common ways to make a contribution without a whole lot of effort:

Cash

Making a cash donation is the easiest way to give, and get back. For example, a $1000 cash donation would save you $250 in the 25% bracket; $350 in the 35% bracket.  Just remember to substantiate your gift with a letter or receipt from the qualified organization, a canceled check or a bank statement showing how much you gave.

Stuff

While it is often more profitable (and thoughtful) for you to donate used goods to a charity than it is sell them in a garage or yard sale, keep in mind that per 2006 rules, in order for you to claim a deduction on your ‘stuff’ – whether household items, electronics, linens, furniture or clothing – it has to be in good or better condition (unless you’re writing off a single item, appraised at over $500). To determine your item’s fair market value – what it would sell for in a thrift store – use our free ItsDeductible tool.

Appreciated securities

Giving appreciated securities – such as stocks or mutual fund shares you’ve held for over a year – is one of the best ways to fund your favorite charities because the benefits are twofold: you get to deduct the asset’s market value and you avoid paying capital gains. For example, say you purchased XYZ stock last year for $10,000 and now it’s worth $20,000. If you sold the $20,000 stock instead of donating it, you would pay capital gains tax (15%) on the $10,000 gain. Donate it instead and you’d save $1500 ($10,000 x 15%). Plus, you can deduct the full $20,000. So, if you are in the 25% tax bracket, this could generate another $5,000 in tax savings ($20,000 x 25%), bringing your total tax savings to $6,500.



Toys For Tots

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One of the better-known toy charities operating during the holiday season is Toys For Tots. Run by the U.S. Marines, Toys For Tots collects new, unwrapped toys during October, November and December of each year with the goal of distributing them to less fortunate youngsters all across America.

If you’re looking for a charity that is unquestionably legitimate and has never even remotely been linked to scams, this is it. Toys For Tots has been around since 1947, consistently ranks in Chronicle of Philanthropy’s Philanthropy 400 and was named “Outstanding Non-Profit Organization Of The Year” by the DMA Non-Profit Federation in 2003. Toys For Tots offers a comprehensive list of ways to donate here.

Toys ‘R Us

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Toys R’ Us is another holiday season toy donation option. In addition to accepting donations in many areas on behalf of Toys For Tots, Toys ‘R Us has consistently collected toy donations of its own from nearby citizens during the latter months of each year. Customers are also encouraged to donate new, unwrapped toys at Babies ‘R Us and Toys ‘R Us Express locations.

As an added encouragement to donate, Toys ‘R Us assures donors that “all toy donations made at “R”Us stores will be distributed locally, so every toy donation made will directly benefit needy children in your area.” Donors are also provided with receipts (for deduction purposes) whether they donate online or in stores.

Goodwill

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If there is no Salvation Army in your area, there is probably a Goodwill center instead. These two organizations serve largely the same purpose: providing donated, good-quality items to the nearby poor for free or at vastly reduced prices. Like Salvation Army, Goodwill stores happily accept donations of new or gently used toys and will provide you with all the tax-related documentation you might need.

Use the Goodwill Locator to find a location near you. Also, have TurboTax donate $5 to Goodwill on your behalf on Facebook from now till Dec. 31, 2010.

The Toy Bank

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Since The Toy Bank program took off in 2003, over $50 million in new toys have been donated and distributed to hundreds of children’s charities. The program, run by Toy Industry Foundation, works with nearly 400 charities including Ronald McDonald House Charities and My Stuff Bags Foundation (which serves foster children.) Additionally, The Toy Bank has relationships with dozens of special needs schools, military families and at-risk children.

In short, there is no doubt that toys contributed to The Toy Bank will reach worthy and deserving recipients this holiday season.

Ronald McDonald House Charities

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Another reliable option for holiday toy donations is Ronald McDonald House Charities. On a webpage devoted exclusively to their Toy & Food Donation Program, RMHC explains that they welcome any or all of the following:

• Board games
• Stuffed animals and dolls
• Books for various reading levels
• Puzzles
• Video games (rated E)
• Movies (rated G)
• Balls and outdoor games

The only requirement is that these toys be new and store-bought (handmade toys are not welcome.) If you want to help kids in your area specifically, use the chapter locator to find wish lists of children nearby.

Finding Other Charities

There are countless other charities to donate toys to this holiday season. To find them, consider the following resources:

• Charity Navigator
• JustGive.org
• IRS Charities Search

According to tax expert, Bob Meighan, the following are smart tax moves taxpayers can make before year’s end to maximize their refunds. Watch this short video, then get 5 more key tips below:

1. Invest in making your home more energy efficient – Spend money to insulate your home, replace drafty windows, replace creaky old furnaces and water heaters or install residential solar, wind turbine systems or geothermal heat pumps to slash your energy bill now and increase your refund at tax time. You could be eligible for up to $1500 federal tax credits for investing in these energy savings.

2. Give back – Donating to qualified charities helps those in need and can increase your tax refund. Obviously you can get a tax write-off for cash contributions, but don’t overlook donations like clothing, furniture, toys and bikes. Even the miles driven to and from volunteering can be deductible. Remember to keep receipts and documentation for all donations. There are free ways to find out how much your items are worth: visit ItsDeductible.com. Keep track of donated items here so it’s easier come tax time. Visit IRS.gov to make sure your chosen charity qualifies.

3. Invest in your retirement plan – Investing in your 401k or IRA can increase your tax refund and fund a more comfortable retirement nest egg – tax free. Contributing to retirement accounts before the end of the year will decrease taxable income, boosting this year’s refund.

4. Use tax software or go online – Despite pending tax law changes, taxpayers using tax software or going online can be confident that tax software will be updated when they are ready to file. Also, most of the pending tax legislation applies to 2011 and beyond. Very few of the pending tax bills affect one’s 2010 tax return.

5. Ask questions – If you have questions on deductions and credits, there is still time to get free answers to your questions. Visit freetaxquestion.com to have a tax expert call you back with a free answer between now and the end of January 2011.