We’re getting close to the end of the year and as everyone does their year end tax planning, it’s important to remember that not all “last minute tax tips” work for everyone. It’s important to analyze your particular tax situation before blindly following these ideas – RJ Weiss shares with us why you might want to wait until January 1st, 2011 to make those charitable donations.

Now that December is here, prepare yourself for Christmas music, crowded malls, and of course, the hundreds of personal finance articles about “Year-End Tax Planning.”

Many of these articles do serve a purpose. However, the majority, do more harm than good.

A common topic among articles about year-end tax planning is the deduction of charitable contributions. What many taxpayers don’t understand is that charitable contributions are only deductible if you itemize your deductions, which only makes sense for about 25% of taxpayers.

The purpose of this article is to discuss how you still might be able to benefit from charitable contributions, even if you don’t plan on itemizing this year. In order to do that, let’s review what deductions are.
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As we near the end of the year, you’ll inevitably start seeing year end tax tips type of posts (I promise you at least one before we close out 2010). Those year end tax tips will certainly recommend that you make some charitable contributions before the end of the year so that you can take advantage of the tax deduction for this year. Before you go out donating money to every organization that you think is worthy, I recommend that you do a little research on charities to make sure your dollar can go as far as it can. With the economy as weak as it is, it’s important to make those contributions count.

Charity Navigator is my go-to charity rating site whenever I want to learn more about the effectiveness of a particular philanthropic organization. They do a fantastic job of reading through the financial statements and boiling it down to metrics that matter. When it comes to donating, you want your dollars to go as far as possible. I don’t want to have fifty cents of every dollar going to fundraising, I want 80 cents to go to the mission and maybe 20 cents to the “other stuff.” (even that seems high to me)

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For years I’ve been accumulating reward points in Citi’s Thank You Network with my Citi mtvU credit card, usually turning them into student loan checks for ACS. With my student loans paid off and the conversion rate weaker (it used to be 2,500 point for $25, now it’s 3,300 for $25), I’ve been looking for an alternative in the gift card department. Unfortunately, none of the cards are really appealing and I thought we could convert the points into a charitable donation but I wasn’t sure how the deduction worked.

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This week, President Obama signed into law a bill that lets taxpayers claim donations made to earthquake relief in Haiti on their 2009 tax returns. If you make a cash contribution between January 11th, 2010 and March 1st, 2010 towards relief aid for earthquake victims in Haiti, you can claim it on your 2009 tax return. Specifically, you are permitted to treat the donation as having been made on December 31st, 2009 for tax purposes.

All other normal donation rules apply such as the burden of proof/written documentation (though, as I’ll explain below, they’ve specifically called out a methodology for text message donations) and how to deduction charitable donations you must itemize your deductions. Unfortunately, non-cash contributions are not eligible for this speedy deduction.

Finally, you are not required to claim the deduction on your 2009 return. Based on your tax situation, it may be better for you to claim the deduction in 2010 rather than in 2009. For example, if will not be itemizing deductions in 2009, you will want to wait until 2010. You cannot claim the deduction for both years.

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It’s well understood that when you donate $100 to an eligible charity, you get a $100 tax deduction if you itemize your deductions.

What happens when you donate $100 in stock to an eligible charity? The exact same thing. You get a $100 deduction to your taxes if you itemize your deductions.

If that’s the case, why is donating appreciate stock such a big deal? It’s a big deal because the stock didn’t cost you $100, it cost you less than that but you get to deduct the full value as a charitable donation on your taxes. The charity gets a sizable donation, you get a nice tax deduction, and everyone wins. Well… not everyone. The only loser in this entire transaction is the United States Treasury.

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With the year drawing to a close, a lot of people are thinking about year end tax moves, including myself. In general, there aren’t many year end tax moves you can make on December 18th. If you’re going to buy a house and take advantage of the home buyer tax credit, you would’ve started the process by now. If you wanted to buy a car, while it’s certainly not a terrible time to buy, it’s not terribly likely you’ll be able to do an in depth search, especially with the holidays getting in the way.

However, there are a handful of steps you can take and my favorite of them all is to pick out a few charities to support. You have to be sure to follow the documentation rules for tax purposes but it can pay dividends both financially and spiritually. I won’t get into the mechanics but each year we donate some money to a half dozen charities we’ve supported in the past and find a few new ones to support on a smaller level.

Anytime you can give, whether it’s time or money, the organization benefits. It can be $10, $100, or $1,000 but the important part is to remember those who are working hard to provide more good in this world and help support them when you can.

What’s your favorite year end tax deduction? If it’s charitable giving, what organizations do you support and how? It’s always fun to learn about smaller organizations doing great work at the local level.

With it being the holidays, a lot of stores have partnered up with local charities to solicit donations from customers. If you donate a dollar, you get your name on a balloon or a star that gets plastered behind the registers of a store. It’s always voluntary and optional and only in a few cases have I ever heard of someone “donating” without their consent (the recent Radio Shack – Livestrong debacle).

I have no qualms with these types of arrangements, as long as the retailer isn’t too pushy about it, but I almost never donate money. I don’t donate for a couple reasons:

• It wasn’t part of the plan. I don’t have some grandiose philanthropic plan but there are several charities we support and while a dollar or two here or there doesn’t derail anything, part of me feels a bit ambushed when I’m solicited at a grocery store.
• Donating direct is more efficient. The store gets something for their involvement (at least the charity has to pay for the promotional materials), I’d rather donate via a website or sending a check so that the charity gets 100% of the money.

There are, however, exceptions to my general feeling towards these solicitations. For whatever reason, if it has to do with kids and if the promotional push is one of their “big” ones for the year, we’ll usually buy a balloon or star or whatever. The prime example is Alex’s Lemonade Stand’s partnership with Rita’s Water ice.

What’s your take on this? Hate them? Indifferent?

Next week I’ll be attending Pubcon in Las Vegas, a conference for online publishers, and one of the fun events going on is a charity poker tournament hosted by my buddy DK at Purposeinc. To participate, we were asked to write about our favorite charity and mine, without question, is the Ghent Bar Tour, which supports the Hope House Foundation. I don’t often write too much about the charities we support, which I probably should change for the future (let me know in the comments if you think so!), but I have written about the Ghent Bar Tour in the past (1, 2).

My friend Scott has been running the twice-annual Ghent Bar Tour for the last few years and I’ve had the great pleasure of being a sponsor every time he’s done it. He’s raised tens of thousands of dollars for the Make A Wish Foundation and Hope House Foundation. This past summer, they raised nearly $12,000 in one of the worst recessions we’ve seen in decades. That’s a testament to Scott, his team, the 75 volunteers, and all the generous sponsors who kicked in to support such a worthy cause.

Also, if you’ll be in Vegas next week, either for Pubcon or just for fun, shoot me an email and we can hang out.