Take the Bite out of 2011 Taxes

SAN FRANCISCO--(BUSINESS WIRE)--With the effects of the tax filing deadline still fresh, Schwab Charitable suggests that now is an excellent time for investors and their financial advisors to begin planning ahead to reduce their taxes for 2011 while also providing maximum benefits to their favorite charities.

“Investors who are motivated to support charitable causes can do so in a way that substantially reduces their tax bills.”

From donating cash or appreciated assets to making a distribution from your IRA to a qualified charity, there are plenty of ways to make a difference and concurrently take a bite out of 2011 taxes.

“It’s a win-win situation,” says Kim Wright-Violich, President of Schwab Charitable. “Investors who are motivated to support charitable causes can do so in a way that substantially reduces their tax bills.”

Schwab Charitable’s tips for potentially reducing 2011 tax bills include:

Give Appreciated Stock: With stock market values almost doublingⁱ their lows in 2009, giving appreciated publicly-traded stock that has been held for more than a year can be a smart option. The donation provides a current year tax deduction based on the market value of the stock and avoids potential capital gains taxes of selling the stock. It has been estimated that 10-20 million households could potentially save between $2.2-$4.5 billion a year in taxes by donating appreciated securities instead of giving cash directly to charitiesⁱⁱ
Give Privately-Held Assets: For executives and those who own their own businesses, private C- and S-Corp stock, restricted stock, limited partnership interests, and other privately held assets may also be a tax-effective method of giving. Real estate and tangible personal property like artwork and collectibles can also make good gifts under certain conditions.
Give From Your IRA: The IRA charitable rollover allows individuals age 70 ½ and older to transfer money tax free from an IRA directly to charity in lieu of taking taxable required minimum distributions. Distributions are not allowed to charitable vehicles such as private foundations, supporting organizations, or donor-advised funds.
Keep Track Of Cash Contributions and Expenses Incurred While Volunteering: Hang on to written receipts from the charity for cash gifts to claim a deduction. Cash contributions to public charities are deductible up to 50% of AGI, and excess contributions can be carried forward for five years. Certain un-reimbursed expenses that accumulate while volunteering for a qualified charity, including mileage, are also deductible.
Open A Donor-Advised Fund: Since it can be difficult for individuals and charities to know how to transfer and accept non-cash assets, it can be wise to choose a charitable vehicle to act as an intermediary. While many charitable vehicles are complex and expensive to establish, donor-advised funds cost nothing to set up and can often be opened in one day with an irrevocable tax-deductible contribution of securities or cash. By separating tax-related decisions from charitable giving decisions, donor-advised funds can simplify the process and help individuals become more strategic about their charitable giving.

Individual tax circumstances can vary, and donors are encouraged to seek individualized tax advice where appropriate.

“As the tax code has grown increasingly complex, donors may not even be aware they're missing out on valuable tax breaks,” says Wright-Violich. “Taking the time to think strategically about charitable giving and its tax benefits, and identifying alternatives early will ultimately benefit both the donor and his or her chosen charities.”

About Schwab Charitable

Created as a national donor-advised fund with a mission to increase charitable giving nationwide, Schwab Charitable has raised over $5 billion and facilitated over $2 billion in grants to charity since inception. Donor-advised account sizes range from $5,000 to over $300 million. For more information, visit www.schwabcharitable.org.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab Charitable recommends consultation with a qualified tax advisor, CPA, Financial Planner, or Investment Manager.

ⁱ S&P 500 up 95.7% March 13, 2009- April 21 2011; Dow Jones Industrial Average up 88.7% March 13, 2009- April 21 2011

ⁱⁱ Tom Herman, “Donors Harvest Tax Benefits of Hot Stocks”, Wall Street Journal, November 7, 2007