Comprehensive Advisor

Donating Appreciated Securities, It's Win-Win for You

This is where some expert assistance could come in handy.  When you donate stocks, mutual fund shares or any other security you have held for more than one year, generally you may deduct the current fair market value of the donated securities. Additionally, you avoid paying capital gains taxes on the appreciated value.

 

So, think about this for just a moment.  You get to take the charitable deduction on not only the amount you originally paid for the security, but the appreciated amount.  Add to this the benefit of not paying any capital gains taxes on the appreciation.  This is one of the few win-win situations for taxpayers.  As most of you know, the tax code is all about you lose, the IRS wins.

 

Let’s look at an example.  Say you bought 100 shares of Apple on 1/21/2003 at a closing price of $14.02.  You waited a bunch of years and decided to give it away yesterday at a closing price of $192.40.  Your charitable donation on Schedule A is in the amount of $19,240.00.  That’s right, you paid $1,402.00 and you get to deduct nearly $18,000 more than what you paid.  Further, you avoid paying $2,675.70 in capital gains taxes.  Is this a great tax provision, or what!

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Have a Digital Camera? Now's the Time to Use It!

If you’re ever audited, it helps to have photographs or video of these items.  When purchasing a new item always demand a detailed receipt.

 

One other supremely beneficial use of the video recording you make for Uncle Sam is to use your digital records for insurance claim purposes.

 

For one small investment in a digital camera, you can take care of two birds at one time.  You can prove to your prodigious Washington-based Uncle Sam the item you donated was what you claimed.  Also, in the case of a fire, flood, or other disaster (natural or otherwise), you can prove to the insurance company the extent of your loss.

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Think Twice Before Unloading Junk

Under a provision of the 2006 Pension Protection Act, contributions of physical items must be in good used condition or better to qualify for a deduction. This means you can’t deduct ripped or discolored clothing (unless those jeans were bought in such condition!).  Non-working Appliances don’t qualify for a deduction any longer, either.

 

If you donate noncash property valued at more than $500, you need to report to the IRS how and when you acquired the property and your cost basis. You must file Form 8283, Noncash Charitable Contributions, for all donations of property valued at more than $500.

 

When this $500 limit came into being a number of years ago, the IRS reported record numbers of taxpayers claiming $495 or so of noncash contributions.  Now there’s a surprise!

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Giving It Away, Keep Those Records!

If you give away property whether it’s clothing or household items, get a receipt that includes a description of the donated property and the amount of the fair market value of the donated property.

 

If a donation is left at a charity’s unattended drop site, keep a written record of the donation.  Your record should include a description of the property, its condition, and its value (of course!).  The IRS is looking for appraised values or fair market value.  Without substantiation, the IRS might be looking for yard sale value.

 

For any kind of vehicle, boat or airplane, the deduction is now limited to the gross proceeds from the sale of the item.   Back in the good old days, you could claim blue book value for a clunker.  Those days are gone forever!  This rule applies if the claimed value of the vehicle is more than $500.   Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

There are Charities, and Then There are Charities!

You need to make sure the organizations receiving your hard earned dollars are qualified as Section 501c3 charities.  You can check IRS Publication 78, available online and at many public libraries.  Pub. 78 lists most organizations that are qualified to receive deductible contributions.  Better yet, there’s an online version too. Just go to IRS.gov and type in “Search for Charities.”

 

There is a key exception to the Pub. 78 list.  It’s important to note that churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even though they often are not listed in Publication 78.

 

Oftentimes, what looks like a charity on the outside is really a social club or political organization.  For example, I’m active in the local BMW car club.  While it’s a great bunch of folks and we have fun driving around, it’s purely a social club.  Contributions to it receive no favored status within the tax code.

 

Political parties are another bunch that do not qualify as a recipient of tax deductible contributions.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Keep These Records Playing!

Uncle Sam likes a record. To deduct any charitable donation of money, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution.  It definitely helps to have both. Bank records mean canceled checks, bank or credit union statements or credit card statements. Bank or credit union statements should show the name of the charity and the date and amount paid. Credit card statements should show the name of the charity and the transaction posting date.

 

For payroll deductions, the taxpayer should retain a pay stub, Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity. If you remember the good old days when the IRS was satisfied with personal bank registers or scribbled notes to document the donation, forget about them!  They’re not so easily satisfied anymore.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Year End Planning, It's Not Too Late to Start

Charitable giving is an important part of tax planning at yearend, so be sure to look at both the cash and the noncash aspects of giving. Depending on the amount of earned income you have and the amounts of your charitable donations, it may make sense to contact a tax expert or financial planner to talk about the tax ramifications for your particular giving situation.

 

 

Remember, you have to itemize.  Only individual taxpayers who itemize their deductions on Schedule A can claim a deduction for charitable contributions. This deduction is not available to people who choose the standard deduction, including anyone who files a shorter form (1040A or 1040EZ).

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Charitable Giving, It's Not Too Late!

There’s a special sinking feeling as you approach Dec. 31 and realize you’ve done no tax planning whatsoever. That includes big issues like end-of-the-year investment decisions, and the smaller ones, like that stuff you no longer use

piling up in the basement.

 

While there may not be much value in each individual item, maybe in aggregate there is enough to save some on your 2009 tax bill.  Imagine that, the stuff in the basement can save you money on taxes!

 

Over the next few posts we’ll discuss some of the finer points of gifting strategies.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

What's Medicaid?

This is the name for the federal program and corresponding state programs that pick up healthcare costs for indigent children and adults. Unless you’re below the poverty line or you spend out your assets in your senior years, this won’t be part of the discussion.

 

There is one benefit Medicaid offers that might tempt people to wonder about trying to qualify for Medicaid.  That benefit is long term care.  The downsides though are sufficiently scary for most people so as to dissuade them from attempting this.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

When Do I Enroll in Medicare?

You have a six-month window to enroll for Medicare starting three months before your 65th birthday and ending three months after. As mentioned above, if you’re already receiving Social Security at age 65, you’ll automatically be enrolled in Part A, but if not and you enroll more than three months after your 65th, you may be subject to a late enrollment penalty.

 

You will be enrolled automatically in Part B, if you are receiving Part A automatically.  Suppose you don’t want Part B?  You’ll need to take affirmative action not to be enrolled.  Also, signing up beyond three months after your 65th birthday may result in additional fees for your premium unless you qualify for one of the Special Enrollment Period exceptions.

 

Part D is entirely different.  You may sign up when you sign up for Part A.  Or, every November 15-December 31 is an open enrollment period during which you can join.  Further, during this open enrollment period you can switch from one plan to another.  As with other Parts of Medicare, late enrollment in Part D may lead to higher premiums.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.