Each year seems to bring even more uncertainty about the future of the U.S. Tax Code, and 2017 is no exception. With the details of various tax reform proposals to take effect in 2018 still being hotly debated in Congress, there’s never been a better time to try to reduce your tax liability for the current tax year. Read on for four ways you may be able to maximize your charitable deductions for 2017.
Donate a (Non-Scrap) Vehicle
Most charitable vehicle donations are limited to a $500 deduction, which often won’t do much to lower your tax bill. However, if you donate a vehicle to a charity and this vehicle is then sold or auctioned off for a larger amount, you may be entitled to deduct the actual sale price. It’s important to keep in mind that this sale price may often be lower than the vehicle’s fair market value, so in some cases, it may make more sense to sell the vehicle yourself and donate the resulting cash to charity instead.
Rebalance Your Stock Portfolio
If you’ve held shares of stock or mutual funds for more than a year and they’re no longer compatible with your overall asset allocation (or you just don’t want to deal with complicated capital gains), you can donate these investments to charity and take a deduction for the asset value at the time of donation. The recipient charity can then choose whether to liquidate these funds or keep them invested for the future.
This type of donation can help you avoid capital gains taxes on the donated funds while taking full advantage of the dollar-for-dollar charitable deduction, and with the Dow, Nasdaq, and S&P 500 all flirting with record highs, there’s never been a better time to rebalance your portfolio while reducing your taxes.
Replace Literal Cash with Checks
Although it was once possible to take a good-faith deduction based on the value of your cash donations throughout the tax year, like cash dropped into the Salvation Army bucket or your church’s collection plate, the IRS has put a stop to this method of deducting charitable contributions. Instead, if you want to make a cash contribution and have it “count,” you’ll need to use a check or some other traceable source of funds.
Don’t Forget About Charitable Miles
If you spend a lot of time driving on behalf of a charity, whether ferrying shelter animals from one city to another to delivering gifts to needy children, you may be able to deduct some of your travel expenses at a rate of $0.14 cents per mile for 2017. While this rate is significantly less than the $0.53 and a half cents per mile allotted for business travel, it can still add up for those who spend hours behind the wheel on behalf of a 501(c)(3) or other charitable organization.
If you’re intrigued by these or other charitable deductions, but not sure you’re eligible to claim each of them yourself, Klein Hall CPA can help. Our experienced accountants can work with you to ensure you’re maximizing every possible tax deduction and credit available.