Doing Good and Lowering Your Tax Bill

Doing Good and Lowering Your Tax Bill

Doing Good and Lowering Your Tax Bill

 

2014 is about to end and you might be thinking about how to lower your tax bill. Given the holiday season, you might also be thinking about how to do some good in the world. There’s still time to do both!

Charitable contributions can be an effective tool to lower your tax bill if you itemize your deductions. Here are some other things to consider:

  • You have to donate to a qualified charity- not individuals, political organizations or candidates.
  • Keep records! Any cash you donate must have a written record with the charity name, date, and amount. For donations over $250, the charity must give you a written letter.
  • Donating clothing or other items? You need to file Form 8283 Noncash Charitable Contributions http://www.irs.gov/pub/irs-pdf/f8283.pdf if the gift is more than $500. Gifts over $5,000 need an appraisal.
  • You can only deduct a contribution if the value of anything you receive is less than your contribution. For example, if you paid to go to a charity dinner, only a portion of that is deductible.

Tax-Free Gifts in 2014

tax free gifts up to $14,000 in 2014

recite-2014 gifts

Every year each individual is allowed to give an unlimited number of tax-free gifts. For 2014, that gift amount is $14,000. Also, direct payments of tuition to educational institutions or direct payments of medical care to providers made on behalf of another person are not subject to gift tax. However, if the payments must be direct- reimbursing the person for either is a taxable gift.

What does this mean? With a little creativity, large amounts of money can be moved around tax-free. Look at these examples:

  • A couple has a married child. If each parent gives the child and the spouse the gift limit for the year, they can make four gifts and transfer $56,000 tax free.
  • If grandma and grandpa want to help pay for college, they can write checks directly to Junior’s university and avoid paying gift tax.

 

Tweet it!  Give tax-free gifts up to $14,000 in 2014! Read strategies for gifting here: bit.ly/1iS3d1k @BetteHochberger 

Want to give a gift over $14,000? Contact me for information on making larger gifts.