Monday, March 22, 2010
Another charitable deduction that is not as widely known is mileage driven for charitable activities. For example, if you volunteer with the Boy/Girl Scouts and drive kids to various activities related to scouts, the mileage could be used as an itemized deduction. Similarly, if you volunteer at your church or local soup kitchen, mileage would also be deductible. For 2009 tax returns, the charitable mileage rate is 14 cents/mile in contrast to the business related rate of 55 cents/mile. See IRS.gov for more details.
Another very good tax planning strategy which is best implemented at the end of the taxable year is donating property which would have a capital gain such as shares of stock or investment real estate to a charitable organization. Let's assume you purchased 100 shares of ABC stock at a price of $40 per share and it is trading at $50 per share at the end of the year. Rather than selling and paying tax on the $10 per share profit, by donating the stock to a charitable organization you would avoid paying tax on the capital gain as well as benefit the charity. It's an opportunity to choose where your dollars go rather than depending on the government to make that choice for you. This technique, of course, assumes that you have charitable inclinations. NationalChristian.com has good information on setting up a donor advised fund or Charitable Remainder Trust if these are options you'd like to explore.
Using itemized deductions requires that you have total deductions greater than the standard deduction level which for 2009 is $11,400 for married couples, $5,700 for single folks, and $8,350 for heads of household. http://www.irs.gov/newsroom/article/0,,id=187825,00.html Other common deductions in addition to charitable deductions include mortgage interest, state income tax, property tax, education expenses, and business expenses exceeding 2% of adjusted gross income.
Happy tax returning!