Charitable Deductions

Tax Relief – Let’s Be Fair and Charitable

Any tax scheme should reflect a nation’s goal to increase productivity and to improve the lives of people of all income and social levels. As it is now, the U.S. tax system has too many inequities. Let’s look at a few:

§ Successful small entrepreneurs must give almost 50% of their income to government in taxes

§ Most Americans can’t deduct their charitable donations

§ Marriage often means that a couple will be subjected to higher tax burdens

§ Farms and businesses owned by families are sold to pay death tax

§ Single parents (usually women) are in a higher marginal tax bracket than the wealthy

This is not a fair system and a tax plan must provide tax relief for those who belong to the groups described above.

When the income tax was established, the importance of supporting and encouraging charitable donations by providing a deduction for doing so was realised. Unfortunately, a whopping 70% of persons who file taxes cannot deduct the donations to charities because these deductions are not itemized.

While the intention is not to make the wealthy ‘pay’ for being wealthy, a fair, balanced tax relief must see the more affluent citizens bearing a bigger portion of the tax load; and by allowing each taxpayer to deduct her/his charitable donations by expanding this deduction to non-itemizers, millions or even billions more will be gained in charitable contributions.

So let’s encourage the government, through the way we vote and lobby and protest, to be for fair and charitable in the tax plan, so that we all – rich or not-so-rich – would get that tax relief.

Cash Donations For Haiti Relief Deduct In 2009, Paid In 2010

Certain Cash Contributions for Haiti Relief Can Be Deducted on Your 2009 Tax Return Congress passed a new law, and President  Obama Signs Legislation Providing Immediate Tax Deductions for Haiti Charitable Contributions January 22, 2010. Which allows you to choose to deduct certain charitable contributions of money on your 2009 tax return instead of your 2010 return.

1.The contributions must have been made after January 11, 2010, and before March 1, 2010, for the relief of victims in areas affected by the January 12, 2010, earthquake in Haiti.

2. Contributions of money include contributions made by cash, check, money order, credit card, charge card, debit card, or via cell phone. The new law was enacted after the 2009 forms, instructions, and publications had already been printed.

3. When preparing your 2009 tax return, you may complete the forms as if these contributions were made on December 31, 2009, instead of in 2010. To deduct your charitable contributions, you must itemize deductions on Schedule A (Form 1040) or Schedule A (Form 1040NR). The contribution must be made to a qualified organization and meet all other requirements for charitable contribution deductions.

4. However, if you made the contribution by phone or text message, a telephone bill showing the name of the donee organization, the date of the contribution, and the amount of the contribution will satisfy the record keeping requirement. Therefore, for example, if you made a $10 charitable contribution by text message that was charged to your telephone or wireless account, a bill from your telecommunications company containing this information satisfies the record keeping requirement.

However, this special deduction does not apply to other qualified charitable contrrbutions.

Five Easy Steps to Charitable Car Donations

Are you tired of using your old car but can’t seem to find the time to replace it? We all know that buying a new car doesn’t take a lot of time but it is getting rid of the old car that does.  If you opt to sell your old car, this would mean taking time off from work to refurbish your car, advertise, entertain possible buyers and do the necessary paperwork.  Fortunately, you can avoid all these with charitable car donations.

Through charitable car donations, you are guaranteed a fast and convenient way to dispose your old car.  Charitable car donations are executed by simply transferring or donating your car to a car donations services who act as intermediaries for charitable institutions who are involved in specific or varied causes.  The causes that these institutions may support are: helping disabled people, homeless individuals, cancer patients, or battered individuals.  So, charitable car donations not only provide you with a fast and convenient option of getting rid of an old car but a way of helping the needy as well.

Moreover, the federal government rewards you for your charitable car donations with tax deductions.  According to the federal tax legislation governing car donations, the gross sales amount or the fair market value is an allowable deduction to tax payable.

If you want to get rid of your old car through charitable car donations but don’t know how, here are the steps that you should take.

1.  Prepare the car’s title.  Car donations services only accept cars with titles.  So when you decide to donate your old car to charitable car donations, make sure you have your car’s title on hand.

2.  Search for a reputable car donations services.  The whole process of donating your car is convenient and fast, and so is looking for a car donations services.  You can do this at the comfort of your own home by surfing online.  However, do not just choose the first car donations services that you come across.  Always look for a 501(c) (3) charity organization classification.  This is to ensure that the legal personality of the car donations services.  If you still doubt the car donations service’s 501(c) (3) classification claim, you may also verify with the IRS Tax Exempt and Government Entities Department.

3.  Call the toll-free number and fill out the application form.  Online car donations services have toll-free numbers that you can call.  Some information, such as the paperwork and car pick-up process, may not be available on the website and you may want to verify this.  Aside from the phone call, car donations services may require you to fill-out an application form.  This will not be a hassle for you since this application form is available online and submitting entails clicking the submit button.

4.  Wait for the car pick-up.  The car donations services lives up to their convenience and speedy feature with immediate car pick-ups, which is usually within 24 to 48 hours.  When your car is picked up, it is important to ask for a document acknowledging the receipt of your car.  This document however, may not be the document required for your tax deduction.

5.  Wait for your tax deduction paper requirements.  To claim your tax deductions, you will be required to submit an acknowledgment receipt containing the details of your charitable car donations.  Car donations services prepare this paperwork but may take a maximum of 30 days.  After picking up your car, the car donations services may need time to refurbish or fix the car.

All About Charitable Gift Annuities

Charitable gift annuities make a benevolent way for financial donations to your favorite charities. They also create fixed monthly income for investors to receive for the rest of their lives. These annuities are similar to immediate ones which help you provide an irrevocable donation; be it in form of cash, marketable securities, and others to your favorite charities. They guarantee fixed monthly income as well as cash payments to the investors for the rest of their lives. Rather, they make best options to fund your favorite charity meanwhile securing your own future and life.

They are extremely flexible and make a wonderful way to give out a charity. They can be considered to have a fixed income for life. They make a significant impact on the investors as they offer relatively modest amounts. They are designed, especially to help senior citizens to fund their favorite organizations without facing any kind of financial difficulty. In fact, they help them to be more generous in their act.

Apart from this, when compared to any other commercial annuity in the market, they are relatively straightforward. Hence, it is extremely important for donors to consider their pros and cons:

*    Like many financial investments, they are not insured.

*    It is advised to do a complete research.

*    The investors must search about charity organizations to which they want to make donations.

*    The investors must know the structure of their annuity.

*    They must research how much amount actually goes to the charitable work.

*    Remember, their payments are fixed from the outset.

*    They will neither increase nor does decrease.

*    They are not affected by interest rates or the stock market.

Additionally, if you observe carefully, the donors that belong to age group of 60 to 80 years are looking for the ways to assist their favorite charities in the best possible way. But, they do not want to face any financial problem when giving out to a charity. This is the main reason why nowadays most of the donors are heading towards these options as they not only help them in doing charities, but also secure their future for the rest of their life.

Helping investors to offer a valuable portion of their incomes to charities, they give them a satisfied feeling of contributing to a human cause. Also, they are not made only for one person, but can be opted by husbands and wives as well. Assured throughout life, they not only offer satisfactory means to provide secured income for the rest of life, but also help investors to give out financial help to their favorite charities, whenever they want. So, if you too want to make donations to a good cause without having any financial problems, you can opt for these annuities as they make a best choice for all your charity concerns. They even offer great support in these difficult economic times. Serve the human cause and receive an immediate tax deduction from these charities.

Tax Deductions the First Time Home Buyer Can Expect

What You Can Expect From Your New Home

When one acquires his or her first new home, there is great expectation of a new income tax deduction. This expectation exists for both single folks and married couples as they wander into the new world of itemized deductions. No more do we get to fill out the short income tax forms, we must now use federal form “schedule A” to get the tax goodies that others have promised. What lies in store for the first time home buyer? What income tax benefits really do exist and how does the first time home buyer go about getting the benefits? This is what we came to discuss and we will not rest until a firm understanding of first time home buying is reached.

Step One-The Settlement

Before moving into a new residence, the all anticipated settlement date must arrive. Are there income tax deductions on the settlement sheet? There certainly could be. If points are paid to obtain financing, these points are income tax deductible and include points paid by the seller. There must be enough money paid by the borrower at settlement to cover the amount of points paid in order to get a current income tax deduction. When seller paid points are taken as a tax deduction, the cost basis of the home must be reduced by the seller paid points. For example, if a new home is purchased for $400,000, and the seller pays one point or $4,000, the buyer can deduct this amount but will reduce the home’s cost basis to $396,000. The deduction of points in the year of settlement is unique to the purchase of a principal residence. Any other purchase of real estate would require the amortization of points to expense over the life of the loan.

Real estate taxes paid at settlement are also deductible. This is the amount on page one of the settlement sheet that reimburses taxes paid by the seller in advance of his leaving the property. Taxes placed in escrow (usually displayed on page two of the settlement sheet) are not currently deductible as settlement expenses but will be deductible when disbursed by escrow. The remaining items on the settlement sheet are not currently deductible and should be capitalized as cost of the residence.

The time of year that settlement on a new residence occurs can have a significant impact on the availability of income tax deductions. For instance, suppose a married couple settles on a new home in December. Because this is their first home, they have not been itemizing deductions but instead have been using the standard deduction of $10,300 (2006 standard deduction for married couples filing a joint return). They will not make their first mortgage payment until January of the next year. Because of this, it is likely that the deductible settlement costs will be of little or no value to the happy home owners. They would have been better off to push settlement over to January and into a year where they would have twelve mortgage payments, real estate taxes, and could make maximum use of deductible settlement costs. Please plan your transaction accordingly.

Going Forward

Looking ahead, the first time home owner can look forward to deducting mortgage interest expense from their income taxes. This is true as long as their original acquisition debt does not exceed $1 million. Real estate taxes will also be deductible providing that the home owner or owners are not in the alternative minimum tax. Assuming that alternative minimum tax does not apply, the first time home buyer can expect to get tax deductions for both the mortgage interest and the real estate taxes paid during the year. It is even possible to get the tax advantages of home ownership immediately by changing withholding allowances. Let’s assume that a single taxpayer will have $20,000 in mortgage interest deductions and $4,000 in real estate taxes. Because this taxpayer’s standard deduction of $5,150 is built in to the tax withholding tables, we know that he can take an additional $18,150 in deductions ($24,000 less the standard deduction of $5,150). In order to get the tax benefit currently, the taxpayer would file a new W-4 form (withholding allowances form) with the payroll department where he works. This taxpayer would be eligible to claim an additional 5 exemptions ($18,150 divided by $3,300 which is the personal exemption allowance) which would thane serve to increase net pay over the upcoming weeks. This process works similarly for married couples except that the standard deduction used for determining additional deductions is $10,300. I should mention this caution. If both husband and wife work, each has a standard deduction built-in to their respective withholding tables. In this case, the amount that is used to calculate excess deductions is $20,600. Don’t forget that other deductions making up itemized deductions include state income taxes withheld or paid, charitable contributions, casualty and theft losses, medical expenses exceeding adjusted gross income limits, and miscellaneous deduction (typically from un-reimbursed employee business expenses). Remember, if a taxpayer is in the alternative minimum tax, there will be no benefit for income and real estate taxes paid and no benefit for miscellaneous itemized deductions. This is supposed to be a simple overview of what a new homeowner can expect in the way of income tax benefits. Unfortunately, nothing is ever really simple.

Ron Piner, CPA

Host of “Better Business”

Saturday Mornings at 10ET

On WBIS AM 1190

www.wbis1190.com

www.mwibonline.com

taxguy9@hotmail.com

Charity Donations – Tax Deduction

First of all the charity donation must really happen because a pledge or promise to donate in not enough for tax deduction. The donor must be careful to who or what is giving hid donation. The receiver must be eligible to itemize the donation. The organization that receives the donation also must have tax-exempt status.

Record keeping requirements for the documentation of the charity donation must be met. Taxpayers are required to keep excellent records of their charitable contributions. Donors must keep written records of all cash donations. Donations of $250 or more will not be allowed as a tax deduction without supporting documentation. Records must indicate the name of the charitable organization, the date of your contribution, and the amount of the contribution. This new record keeping requirement took effect beginning with the 2007 tax year.

If donation is other then cash it is also subject to tax deduction with note that every documentation regarding that particular donation together with written acknowledgement received from the charity must be saved.  If non-cash donations exceed $500 IRS Form 8283 must be attached. If the donation is vehicle such as car, boat, truck or airplane which worth exceeds $500, a written acknowledgement from the non-profit organization must be received in order the be eligible for tax deduction.

There are certain limitations to this kind of tax deduction. If the donation is cash, than up to 50% of adjusted gross income can be deducted. If donation is property, than up to 30% of adjusted gross income is deductible. If the donation is appreciated capital gains, than up to 20% of adjusted income is deductible. The excess contributions can be carried over for a maximum of five years.

Donations are not tax deductible if they are given to individual people, labor unions, business associations, chambers of commerce, foreign governments, political parties, professional associations, for profit schools and hospitals.

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Itemizing Your Deductions And Increase Your Tax Return

It’s true, you can lower your taxable income, you just have to know how to do it the most effective way. You might be thinking that you will simply work less house next year, but there are easy ways to keep your income the same and lower your taxable income.

The answer is through itemized deductions. Now, if you are not big into taxes and how they work, you are probably saying, “through what?” and that’s okay. Everything will be explained, even for the least tax-savvy person.

Before we talk about expenses that are tax deductible, let’s figure out why we want to collect this information for our accountant. When you file you taxes, you will either owe additional taxes or you will qualify for a tax refund, determined by the government’s standards and ratios of how many taxes you paid in comparison to your taxable income.

Your taxable income is any income that can be taxed. When you itemize your deductions, you are lowering the amount that is taxable income. Thus you will either end up paying fewer taxes than you would have, or you will receive a bigger refund from Uncle Sam.

There are many different categories to itemizing tax deductions. You might start with medical and dental bills. Even if you have insurance there are usually other costs to keeping your family health.

You can count any prescriptions that insurance doesn’t cover, along with dental work, and even eyeglasses and contact lenses. If there is someone in your household with special needs, you can count any expenses that cost to help them, including that new ramp you had installed for your son’s wheelchair.

Now, there is a guideline with counting medical expenses as tax deductions, but if you gather up your bills and receipts you will most likely surpass that number and be able to count all of these medical costs and tax deductible.

Don’t ever forget to count your mortgage interest as tax deductible. If you are a newer home owner, you are probably paying more in interest than you are in principal toward your mortgage loan. This amount that you paid in interest can be taken away from your total taxable income.

You should receive a tax document from your mortgage lender that you can give to your accountant to add to your tax deductions. Besides medical bills and mortgage interest, you can also subtract any charitable contributions. When you donate money, be sure to get a receipt for that contribution and count them as a tax deduction as well.

Now, you’re starting to see how it works. The more you have paid in mortgage interest, medical expenses, charitable donations, and the bigger tax break you will get. Makes sense doesn’t it?

If you have a small business, you will need to keep tract of mileage and all business expenses from new office furniture to the bill for the internet connection. Your accountant can help you find other tax deductions to help you get a better tax return.