Giving to Charity for the Holidays

As families across the country feel the impact of the recession, charities are feeling the pinch too. Charitable giving, which had risen steadily each year over the past decade to more than $300 billion, fell below that figure last year and is projected to drop even further in 2009. With money tight, givers are becoming less likely to whip out their wallet or their checkbook, even at holiday time. According to charitable giving consultants, however, there are some less painful ways to give this year.

One method is to tap your IRA. If you’re over 70½, you have until the end of this year to make a direct transfer of funds to a charity. The funds won’t count as income and you won’t have to pay taxes on them. Since the donation isn’t deductible, however, this tactic makes more sense for those who don’t itemize deductions. If you’re over 59½, you’ll pay taxes on any cash you take out of the IRA to give away, but you won’t have to pay the 10% penalty and you’ll get a charitable tax deduction.

Another way is to give stock. If you own stock that has gone up in price and you’ve held it for more than a year, you can give it directly to your favorite charity, claim the deduction for the full appreciated value of the stock, and avoid the capital gains tax on the returns. If you have a stock that’s lower in value, however, you’re better off selling it, writing off the loss, and giving the proceeds to charity. Before giving stock, however, make sure the charity is set up to handle the donation. A small charity may not have a brokerage account and may have a hard time converting the gift of stock into cash.