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Year-end giving moves, December 2011

This time of year everyone is thinking of giving and getting. For tax-savvy folks, the goal is to be generous to everyone except the Internal Revenue Service.

Yearend money moves_givingFollow the rules
Most charitable gifts are fully deductible, as long as you follow the donation rules

First, you must itemize to deduct your charitable gifts.

Next, make sure the organization to which you are about to give meets IRS qualifications. Ask the group about its tax-exempt status. If it can't or won't provide you information, find another charity. You also can check IRS Publication 78, which lets you search online, for your charity's tax standing.

Give good gifts. If you donate clothing or household goods, make sure they are in good or better condition. The law was changed a few years ago because too many people were dropping off worthless items at charities and then claiming them a healthy tax deduction for their "gifts."

Get receipts. In most cases, you don't have to send the documentation to the IRS when you file, but you will need it if the IRS questions your deduction.

And, of course, to deduct your gift on this year's tax return, you need to make it by Dec. 31.

Look into RMD rollover
One of the tax breaks extended last December by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was the option for older taxpayers to donate their required IRA distributions to charity.

That means IRA account owners age 70½ or older can transfer up to $100,000 a year from their tax-deferred retirement accounts to qualified charities.

This option also will be available through 2011, but after this year, it must again be extended by Congress.

If you must take a requirement minimum distribution (RMD) from your IRA by the end of the year but don't need the money to cover daily expenses, consider this option.

Just make sure the RMD amount is directly transferred to your favorite IRS-approved charity.

That way you meet the RMD rules (and avoid those penalties), but escape taxes on the distribution amount.

Consider out-of-the-ordinary donations
Every charity will take cash, which in the IRS eyes also means donations by check and credit cards. But there are other tax-approved ways to give.

You can donate appreciated assets. This could be a good way to rebalance your portfolio (discussed in the Year-end Investing Moves post), helping out your favorite nonprofit and avoiding capital gains taxes.

You can give a charity your car or boat or motorcycle or other motorized vehicle.

You also can deduct mileage driven in service of a charitable cause. You cannot, however, deduct the value of your time that you spent volunteering.

Give more to your family and friends
Unsure what to give those near and dear to you? Most folks won't complain if your gift is green, as in money, moolah, bucks, dinero, bread, dough, scratch, loot … you get the idea.

Monetary gifts also could be a nice tax present for you if you have a large estate. Right now, each individual has a lifetime gift and estate tax exemption of $5 million; its double for married couples.

That means you can leave or, more to the point of today's topic, give away up that much and not owe Uncle Sam a dime. If you think your estate might face federal taxes, you can give away some of it now.

In 2011, you can give up to $13,000 (or $26,000 for married couples) to as many individuals as you like or can afford.

Good news: The recipients don't have to be related. Friends count, too. OK, it's good news for your close friends.

More good news: You're not limited to cash. You can give up to $13,000 worth of appreciated securities to someone.

I hope this helps out as you're in this seasonal giving mood.

The 2011 edition of Year-end Money Moves wraps up tomorrow with the financial details segment. See you then!

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Marks@ Car Insurance

The end of the year always adds even more tasks to our already busy schedule, and sometimes it is simply overwhelming.

one more tip would be gather all of your bank or credit card statements and put them in order; oldest on top and most recent on the bottom.

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