Permanent Value

Week in Review (4/7/14)

Bruce Doole
April 7th, 2014

Charitable Donations: The Basics of Giving

While it may be better to give than to receive, with proper planning it’s possible to do both at the same time. Consider the strategies below to help you make the greatest impact with your charitable donations while receiving some tax savings for yourself, too.

Ground rules for giving

The tax aspects of charitable giving can be complex, so it’s a good idea to consult a tax professional about your personal giving strategy. That said, here are a few ground rules:

Get an independent appraisal for gifts of property in excess of $5,000 ($10,000 for closely held stock). You won’t need an appraisal for exchange-traded stocks, bonds or mutual funds.

Subtract the value of any benefits you received for your charitable contribution (e.g., books, tapes, meals, entertainment and so on) before you deduct it.

Tax treatments by type of gift

Generally speaking, the tax advantages of a charitable contribution depend on three factors: the recipient (only donations to qualified charities are deductible), how you structure the gift and its form. Different types of charitable donations—cash, stock or personal property—offer different tax advantages and drawbacks.


Cash donations are simple and usually fully deductible. As previously mentioned, you will need a receipt from the charity or a bank record (such as a canceled check or statement) to substantiate your cash gift, no matter how small.

-Tangible personal property

You can donate almost any item, including old clothing, household goods, or vehicles. Keep in mind that gifts of used clothing and household items must be in “good used condition or better.”


You can deduct transportation costs and other expenses related to volunteering. However, keep in mind, the value of volunteer time isn’t deductible.

-Limitation on itemized deductions

Starting in the 2013 tax year, the so-called Pease limitation on itemized deductions (named for the Congressman who first introduced it) is back in effect. Most itemized deductions, including charitable deductions, are reduced by 3% of AGI over $250,000 for single filers and $300,000 for married couples filing jointly (up to a maximum total of 80% of itemized deductions).

It’s important to keep in mind that the Pease limitation is driven by your income, not the amount of your itemized deductions. Therefore, it should not be a disincentive for increased charitable giving.

-More sophisticated giving options

If you want to make a longer-term commitment to giving, charitable remainder trusts (CRTs), pooled income funds, private foundations, and donor-advised funds all offer different benefits in terms of flexibility, taxes, administrative costs, and account minimums.

This Week’s Economic Data

-PMI Manufacturing growth so far in March is solid, based on Markit’s PMI flash which is at 55.5, down from unusually high readings of 57.1 for February.
-New home sales in February couldn’t match the strong pace of January, coming in at an annual rate of 440,000 versus a revised 455,000 in January.
-Consumer confidence is higher than expected this month, at 82.3 versus a revised 78.3 in February.
-Real GDP growth for the fourth quarter was revised up slightly to an annualized 2.6% (compared to third quarter’s 4.1%). Expectations were for 2.7%.
-Initial jobless claims fell to 311,000 for the week of March 22. The 4-week average is down a very sharp 9,500 to 317,750, the lowest level in six months.

Source: Charles Schwab/ Ivy Funds