Many Iowans are finding their mailboxes stuffed with requests from charities, clamoring for one last year-end donation. Jeff Strawhacker, a certified public accountant in West Des Moines, says if you haven’t already reached your giving limit for 2010, it wouldn’t hurt to look into writing out a check or two this week for worthy recipients.
“It can be a wise tax-planning move for many people,” Strawhacker says. “Charitable contributions are one of the true remaining deductions that we still have to reduce our tax liabilities. It also satisfies some charitable beliefs that we may have that we want to accomplish before the end of the year.”
We all make different salaries and have different priorities, so it can be a challenge deciding whether it would be in our best financial interests to send off $5 — or $500.
“Determining how much is always a difficult thing,” Strawhacker says. “One of the parameters to think about as far as deducting charitable contributions, you are limited to 50% of your adjusted gross income for that year, however, if you go over that limit, you can carry that excess forward for five subsequent years.”
Before you whip out the checkbook, he says it’s a good idea to do a background check.
“Make sure they are a qualified charitable organization,” Strawhacker says. “You can do that through the IRS through a Publication 78 that lists organizations that are qualified. If you don’t find them in there, you may want to talk to the charity and ask them for their exemption letter. If you’re really concerned, you may want to ask them for more information about their financial activities to see if they are truly using their dollars for the purposes they state.”
Besides the typical charities, Strawhacker says there are other options for giving that may provide more bonuses for the buck.
“Iowa does have an Endow Iowa Tax Credit for contributions given to qualifying community foundations, which adds a little more benefit to that donation,” Strawhacker says. “Certain private schools may have a school tuition organization which allows them to receive contributions and allows the donor to also receive a pretty healthy tax credit for those donations, too.”
Learn more about those at the Iowa Department of Revenue website or here: www.iowalifechanging.com/endowiowa/default.aspx.