Tis the Season of Giving- 12/23/07

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Tis the Season of Giving- 12/23/07

Stewart H. Welch III, CFP, AEP
Founder, The Welch Group, LLC

Tis the Season of Giving

“Tis the Season of Giving”



No doubt about it, December has everyone in the giving mood.  People are busy buying and exchanging gifts, acknowledging friendships and the love of family members.  Giving can also be smart tax planning while providing much needed support for those less fortunate in our community.  Here’s a summary of the most popular ways people give and get a tax deduction:


  • Cash.  Cash remains the most often way people give to tax-exempt organizations (charities and religious organizations).  In order for you to receive a tax deduction for 2007, the postmark for checks mailed must be dated no later than December 31st.  Deductions are limited to 50% of your Adjusted Gross Income.  Any excess contributions above this limit can be carried forward for up to five years.
  • Clothing.  This is an easy way to create a tax deduction and help a lot of people who could use additional clothing during the remaining winter season.  My rule of thumb is … ‘if you haven’t worn it in the past 24 months, give it away‘.  To secure your tax deduction, be sure to create a detailed list of items and their value and get a receipt from the charity indicating the gift was made before the end of the year. 
  • Appreciated property.  A gift of appreciated assets such as stocks, bonds or real estate that you have held for more than one year allows you to save taxes two ways.  First, you get a deduction for the full current market value of the gift.  You also ‘give away’ the embedded capital gains taxes on the appreciation of the asset.  With stock, if you want to continue to hold the stock, simply use cash to replace your shares.  You’ll now have a tax deduction and the same number of shares but with a new, high cost basis.  The stock gift and properly endorsed stock power must be postmarked by December 31st to qualify for a 2007 tax deduction.  Note that due to falling interest rates, you may be holding appreciated bonds in addition to appreciated stocks.  Gifts of appreciated assets held for more than a year are limited to 30% of adjusted gross income.  Deductions in excess of that amount can be used in future tax years for up to 5 years.
  • Retirement accounts.  The Pension Protection Act of 2006 allows anyone who is age 70 ½  or older to gift up to $100,000 of their Traditional IRA directly to a public charity or charities without having to report any income.  While the donor does not receive a tax deduction, he or she avoids receipt of income from the transfer.  The transfer does qualify for the Required Minimum Distribution for 2007.  2007 is the last year these gifts are allowed.
  • Life income gifts.  I see a lot of interest in charitable gift annuities, whereby you make a gift to a charity or religious organization in exchange for a monthly life income.  At your death, the unused portion of the gift reverts to the charity.  As the donor, you can be the income beneficiary or you may designate someone else.  The amount of the deduction is based on the present value of the gift and your income stream is guaranteed by the charity so you’ll want to choose a charity in solid financial condition.