With the effects of the tax filing deadline still fresh in investors’ minds, Charles Schwab is encouraging them to plan ahead for their charitable donations through the end of the year in order to reduce their 2011 taxes.
Schwab says investors can donate cash or appreciated assets, or make a distribution from an IRA.
“It’s a win-win situation,” said Kim Wright-Violich, president of Schwab Charitable. “Investors who are motivated to support charitable causes can do so in a way that substantially reduces their tax bills.”
Schwab estimates that 10 million to 20 million households could save between $2.2 billion and $4.5 billion in taxes by donating appreciated securities instead of giving cash.
In addition, real estate and tangible personal property like artwork and collectibles can also make good gifts.
For those who own their own businesses, private C- and S-Corp. stock, restricted stock, limited partnership interests and other privately held assets, donating portions of these are another option, Schwab said.
Schwab also reminds investors that those 70-1/2 or older can transfer money tax free from an IRA directly to charity in lieu of taking taxable required minimum distributions.
Finally, Schwab also recommends opening a donor-advised fund. While many charitable vehicles are complex and expensive to establish, donor-advised funds cost nothing to set up and can often be opened in one day with an irrevocable tax-deductible contribution of securities or cash, Schwab says.
“As the tax code has grown increasingly complex, donors may not even be aware they’re missing out on valuable tax breaks,” Wright-Violich said. “Taking the time to think strategically about charitable giving and its tax benefits, and identifying alternatives early will ultimately benefit both the donor and his or her chosen charities.”