Paul Estrich's List: taxes

 

   

Doctors Without Borders; image by AFP/Getty Images via @daylife

 

 

Extract the most you can at tax time out of your charitable impulses. The cleverer you are with your tax strategies, the more generous you can afford to be.

Americans claimed $178 billion of deductions in 2008 for their gifts to churches, hospitals, antipoverty programs and other charitable organizations. (How do your donations stack up? Compare them to what’s given away by other Americans at your income level by going here.)

Without the tax benefit, people might not be so charitably inclined. But there’s nothing wrong with getting help from the tax code when you want to give. Here are six ways to do that.

Lump your donations. Suppose that you are retired and living off investments and Social Security, and that you are sending $2,000 a year to Doctors Without Borders, which brings medical care to places like Haiti and Nigeria. Your other itemized deductions, let us say, are $12,000 a year.

You end up with a total of $14,000 in itemized deductions. But you and your husband are over 65, so your standard deduction would have been $13,600. The effect of your donation is to reduce your taxable income by only $400.

Instead, send $10,000 to the organization with a letter explaining that this represents five years of planned giving. Now $8,400 of your giving goes to work lowering your taxes. You’re missing out on only 16% of the potential deduction rather than 80%.