Here’s 3 different ways to help BrightSide and get a nice tax break for yourself.
1. Contribute cash
Most taxpayers know that a contribution to a qualified 501(c)3 charity such as BrightSide Animal Center can be claimed as a tax deduction that reduces your taxable income. But there are additional ways to donate that also save you money on taxes that are less well known. These options, too, must be exercised by Dec. 31, so now is a good time to consider whether one of these strategies works for you.
2. Donate the Required Minimum Distribution from your IRA
If you have an IRA and you are age 70 ½ or older, you are required to take a minimum distribution from that account and you will owe income tax on it as ordinary income. Alternatively, you can donate that minimum distribution to BrightSide as a Qualified Charitable Donation and you will not owe any income tax on the distribution. To qualify, the institution that holds your IRA must make the donation directly from your IRA account. If it passes through your hands, it has become income to you.
The same rule applies if you are younger than 70 ½ but you have inherited an IRA from someone who was subject to the minimum distribution.
For details on how to make your required minimum distribution a direct donation to BrightSide, see this informative article provided by Fidelity Investments, or consult the financial institution where you maintain your IRA.
3. Donate stock that has appreciated in value
When a stock has appreciated in value and you sell it, you are taxed on that gain. The tax rate depends upon how long you have owned the stock. But if you donate that appreciated stock to BrightSide, you avoid any income tax liability on the amount of the gain. Again, the donation must be made directly from your investment account to BrightSide’s account, without passing through your hands, to qualify.
As this article from Kiplinger explains, it may take some time for your investment firm to set up this transfer, so don’t wait until the last minute to make arrangements.
Keep in mind that to take advantage of any of these tax-saving strategies, you must itemize your deductions. If you choose the standard deduction, then you cannot also choose the deductions listed above. Please consult your tax adviser to determine what is best for you.
And thank you for considering BrightSide!