+

How to Maximize Tax Deductions While Making the World a Better Place

Tips on End of Year Donations

+What you will learn: • How much you should give• How to choose charities and nonprofits• How to shop and give at the same time• Planning your giving strategy for 2015

+

Disclaimer

Consult a tax attorney, especially if you have complex securities transactions this year, or large estate or real estate assets to consider.

This is very general information and will not apply to all people in all situations.

+

Step 1 - Figure Out Your Taxable Income

+Income Tax Brackets and Rates

+

Step 2 – Claim the Standard Deduction or Itemize?

+Standard Deduction

+

What can be deducted?

 Home mortgage interest  State and local income taxes or

sales taxes (but not both)  Real estate and personal

property taxes  Gifts to charities  Casualty or theft losses  Unreimbursed medical expenses  Unreimbursed employee

business expenses

+

Step 3 - Add up what you believe you will spend by the end of this year on these expenses.

+Compare the Standard Deduction to Itemized Deductions

In general, if you can itemized deductions greater than the Standard Deduction, you will likely benefit most from itemization.

+Step 4: Estimate Your Target Charitable Contributions

Are you still in the same bracket if you subtract the Standard Deduction from your income?

If you are in a close to the next bracket it is likely even more beneficial to increase your charitable giving to itemize enough deductions to get you into the lower bracket.

+Itemizing to Get into a Lower Bracket

Take your estimated income and subtract the standard deduction and multiply this with your higher bracket tax rate. This is your original tax burden.

(Est. Income – Standard Ded.) High Tax Rate = Tax Liability High [1]

Next look at the number you already computed by adding all your deductions together and subtracting this sum from your estimated income. Take the upper limit income level for the lower bracket and subtract this amount from it. This is the amount you would spend on donations to get you in the new tax bracket.

Upper Income Limit for Lower Bracket - (Est. Income – Itemized Ded.) = Donation Amount Needed to Get into Lower Tax Bracket [2]

Next take the upper income limit for the lower bracket and multiply it times the lower tax rate. This is the lower tax liability. (Upper Income Limit Lower Tax) Lower Tax Rate = Tax Liability Low [3]

If your original high tax liability, [1], is greater than the amount of your lower tax bracket liability, [2], plus the charitable donations amount needed to get there [3], you should itemize and donate an amount equal to [2].

If Equation [1] > [2] + [3], give [2] to charity! It helps the world and gives you a tax break!

+ So you’ve decided to incorporate charitable giving into your annual

financial plan!

Excellent!

+File the right forms

To itemize your deductions, use Form 1040 and  Schedule A, Itemized Deductions.

You can take the standard deduction on Forms 1040, 1040A or 1040EZ.

+Tips on Filing from the IRS

You may be eligible for free, brand-name software to prepare and e-file your tax return. IRS Free File will do the work for you.

Free File software will help you determine if you should itemize and file the right tax forms. It will do the math and e-file your return – all for free.

Otherwise, you may file electronically with commercial software, or through a paid preparer.)

+Where to start?Now is the fun part where you match your values and concerns with your donations.

+Look at Past Donations

Turbo Tax stores these so log in and browse last year’s deductions if you itemized them.

+Any Issues You Care About Missing?

Make sure this year you give to nonprofits doing the work you value most.

If you are a technical type you can pick kinds of organizations by sector, choosing 4 and distribute evenly (25% each) or rank them and give more to those at the top of the list (40%, 30%, 20%, 10%).

+

Choose non-profits you have worked with and know intimately.Do your friends work there? Are they always talking passionately about the work their org does, consider donating to that org.

+

Do you Attend Church?

+Consider Tithing

If your Parish, Church or Temple is particularly active in service provision, putting completed envelopes in the basket during the offertory will ensure your church has a record of your donations.

+Give to Religious Non-profits in Service

If you church is not as active but you want to support the church in broader mission, consider charities (501(c)3 organizations) affiliated with churches or denominations, that do excellent work that you want to support.

Food for the Poor Catholic Charities the The United Methodist Committee on Relief (UMCOR) Catholic Relief Services American Friends Service Committee Mennonite Central Committee

+

Think about pledging or being a monthly contributorThis helps the organizations make long-term plans and leverages your support for their most effective efforts.

+Commit without Earmarks

Think about pledging or being a monthly contributor. This helps the organizations make long-term plans and leverages your support for their most effective efforts.

If you trust the organization’s work, give to them without specifying campaigns, projects or programs. Funding headquarters undergirds all the work done in the field.

+Sponsor a Child or Family in Need

Philippine Scholars

World Vision

Save the Children

Compassion

Family-to-Family