A wonderful advantage to giving a gift to your favorite charity has long been that it can save you money on your taxes. With last year’s change in tax laws, fewer people are itemizing deductions and so aren’t seeing the tax benefit of charitable donations. However, there are still ways your gifts can lower your tax burden.
If you own a business, sponsoring a Library program can be considered an advertising expense instead of a charitable donation. Depending on your tax situation, charitable donations may be of limited benefit, so it can be better to have an advertising expense that is a fully deductible business expense. There are many wonderful Library programs or events you could sponsor that would give your company great exposure.
Donations of appreciated stock (stock that has increased in value) can save you taxes in two ways. Even if you don’t itemize deductions, you don’t pay tax on the gain you might pay if you sold the stock and kept the money from the sale. And, if you do itemize deductions, you get a charitable contribution deduction for the fair market value of the stock. Donating stock can provide a significant tax savings for you.
Charitable Distributions from your IRA directly to a charity do not count as taxable income. Required minimum distribution (RMD) income is usually taxable, unless it is donated directly to a charity such as the Library Foundation. That means you won’t pay tax on that income while still helping the Library. And, by keeping your required minimum distribution out of your taxable income, your adjusted gross income is reduced, which can decrease the amount of tax you pay on your social security benefits. This tax savings related to your RMD can occur regardless of whether you itemize deductions or not.
Even if you can’t itemize deductions on your federal tax return, Montana tax law has not changed, so you may still be able to itemize deductions for Montana tax purposes.
Learn more about how to sponsor a program, donate stock or make a donation from your IRA by contacting Janay Johnson, 406-582-2426 or firstname.lastname@example.org.
Always consult your tax advisor regarding the tax effect of charitable giving in your specific tax situation.