Sunday, December 22, 2013

PocketSmith picks up Xero customers

Sally Rae  for Otago Daily Times writes: When PocketSmith co-founder Jason Leong heard Xero intended winding down its personal finance product, he quickly got in touch with chief executive Rod Drury.
Following discussions between the two companies, the cloud-based online accounting company felt PocketSmith was the ''right fit'' to take on its Xero Personal customers.
Last month, it recommended PocketSmith to those customers and users have been shifting over ever since.
PocketSmith, which was founded in June, 2008, and is based in Dunedin and Auckland, offers a simple budgeting software tool that can help people manage their finances.
Users were primarily from the United States (about 65%) with the rest spread throughout 180 countries.
It has 85,000 users at present.
Xero Personal's users were mostly from New Zealand, Australia and the United Kingdom.
Since announcing its closure, the company disclosed it had 12,000 paying customers.
Like Xero Personal, PocketSmith offered live bank feeds, and its coverage extended to about 15,000 institutions worldwide.
It was probably the only other personal finance application in New Zealand, Mr Leong believed.
PocketSmith was a ''minnow'' compared with Xero, which Mr Leong described as a remarkable company that was ''growing like crazy''.
''It's probably the first of the massive Silicon Valley-style companies here in New Zealand,'' he said.
Personal finance was a ''really exciting space'' and he was fascinated with what was going on in that sphere.
Consumers were become more educated, they understood the tools better and they understood how powerful the cloud could be.
PocketSmith was focused on helping people make better decisions with their money, he said.
What the company did was unique, especially in terms of cash projections, and there was constant refinement, based on feedback from customers.
There were some ''amazing stories'' among its users, which ranged from octogenarians to ''famous people'', including a fashion designer in New York and her celebrity chef husband.
Mr Leong recently heard of a family who got together once a week to use PocketSmith to plan their finances.
''Those stories really make our day,'' he said.
When PocketSmith first started, Mr Leong admitted he was enamoured with the idea of running a start-up and ''just wanted to have a cool company''.
A lot of younger entrepreneurs coming through now had a much clearer vision, he said.
He expected 2014 to be a big year for PocketSmith and that the company would keep growing. It had doubled in size at least every year for the past few years.
Posted on 8:42 PM | Categories:

Can the IRS Effectively Regulate Tax Planning Advice?

Michael B Lang @ Chapman University Law School writes: Can the IRS Effectively Regulate Tax Planning Advice?   (Chapman University Law Research Paper No. 13-16)

(click here to download or read)

 Abstract:     This article asks whether tax planning advice can ever be effectively regulated by the IRS. The article first explores whether tax advice differs in kind from other forms of legal advice. Secondly, it looks at the clear regulatory distinction between the treatment of return preparation advice and the treatment of tax planning advice, taking into account historical anomalies and asking if the difference in treatment is justified or misguided. 

The article then reviews and evaluates efforts to regulate planning advice directly, including earlier attempts to address tax shelter opinions in Circular 230, the current covered opinion rules and written advice rules, and the proposed changes in these sections of Circular 230, Less direct approaches such as flagging certain transactions (reportable transactions) with tax shelter potential for particular focus are noted along with their limitations as is the role of oral tax planning advice. 
Finally, the article discusses how combining more than one approach (such as retaining the accuracy standard of the covered opinion rules, UTP filing requirements, and competency testing) might be useful in regulating the quality of tax planning advice, but concludes that a magic IRS bullet for monitoring and regulating the quality of tax planning advice has yet to be invented. However, the article notes that reducing the ability of taxpayers to rely on the advice of tax advisors to avoid penalties might force taxpayers to hold their advisors to account through malpractice litigation to a degree that the Service will never be able to do.




Click here to download or read.

Posted on 11:15 AM | Categories:

Afordable Care Act ( ACA ) Income Tax Planning Strategies


Over at Bogleheads we read:   ACA Income Tax Planning Strategies


Postby JohnDoh » Sat Dec 21, 2013 1:16 pm

As discussed in this NYT article "New Health Law Frustrates Many in Middle Class" and illustrated in the incorporated charts, there can be a sharp cost to exceeding the ACA premium credit threshold by "a small amount".

According to the IRS's Questions and Answers on the Premium Tax Credit:

For 2013, for residents of one of the 48 contiguous states or Washington, D.C., the following illustrates when household income would be between 100 percent and 400 percent of the federal poverty line:

$11,490 (100%) up to $45,960 (400%) for one individual.
$15,510 (100%) up to $62,040 (400%) for a family of two.
$23,550 (100%) up to $94,200 (400%) for a family of four.

This of course invites the question (not "begs the question" :wink:) of planning strategies to get under and/or stay under the tax credit income ceiling as part of an overall income tax planning strategy (which, in turn, will be part of an overall personal wealth management strategy).

The following are my current thoughts on the matter. Please correct, comment and add as you see fit. Thanks.

John Doh

------------------------------------------------------------------------------------------------------------------

As I currently understand ACA, there seem to be three (3) primary strategies to maximizing the premium subsidy / tax credit:

1) Since the ACA premium credit is based on the taxpayer's MAGI [PDF], the first goal is to minimize MAGI (which will be the same as AGI for most taxpayers), 1040 Line 37/38. The principal strategies are straightforward and have been discussed widely:

Income (MAGI) can thus be reduced by up to $33,800 for an individual and up to $67,600 for a couple eligible aged 55 or over and eligible for all catch-up contributions.
For most people in the relevant situation, this is likely to be a substantial reduction in take-home income available for day-to-day expenses. In general, though, it seems advisable to make up the shortfall from taxable savings (assuming they exist) in order to qualify for the premium tax credit. The net effect, therefore, is a kind of arbitrage from taxable to tax-deferred savings and over time such a taxpayer should expect to accumulate a predominantly tax-deferred portfolio (especially since Roth conversions add to one's MAGI and are thus counter-indicated). This, in turn, may have further consequences when entering the distribution phase.

2) Another way of minimizing MAGI is reducing taxable investment income. This can be done by shifting taxable investments into tax-deferred vehicles such as savings bonds and low-cost variable annuities (such as offered by Vanguard and Jefferson National) -- and, of course, by aggressive tax-loss harvesting.

Of course the appropriateness of this strategy will be highly situation-dependent, but for those who happen to be asset-rich but salary-poor (e.g. modest income folks who have inherited) -- and especially for those closer to the distribution phase -- this would seem desirable. Again, the effect is to reduce the taxable portfolio and increase the tax-sheltered portfolio.

3) A standard, pre-ACA income tax strategy is "deduction bunching". In a post-ACA world this would continue to be important (especially if the taxpayer's MAGI has been reduced through the above strategies) although it may be harder to use advantageously since for most people (but not seniors) the threshold for deductible medical expenses has been raised to 10% of AGI from 7.5%.

For most people in the relevant situation, the largest potentially-deductible expense will be health care in general and health insurance premiums in particular. Therefore, it would seem desirable to bunch health expenses into alternating years to the extent possible. For example, pay one's 2014 premiums monthly during 2014 but pay one's entire 2015 premium in December 2014 and arrange for periodic expenses (e.g. eye exams, new glasses, dental work, etc.) to be paid in 2014. (I presume, but am not certain, that the ACA premium subsidy / tax credit does not alter the deductibility of health insurance premiums. Is this correct?)

------------------------------------------------------------------------------------------------------------------

Well, that's it. Are there other major strategies? Are there other important consequences to these strategies that I have not considered? Thanks again.

JohnDoh
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Re: ACA Income Tax Planning Strategies

Postby WhyNotUs » Sat Dec 21, 2013 1:27 pm
Not close enough to ever qualify, glad there is some support to help people who NEED it, glad I never will.
I do not look to pay extra taxes but also do not look to use complicated strategies to avoid them, have been lucky enough not to rely on direct government benefits but realize (most days :happy ) I benefit from the gov't as a whole and am willing to pay my share. Not looking to help someone strategize to add themselves to my support group. Best wishes.
I own the next hot stock- VTSAX
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Re: ACA Income Tax Planning Strategies

Postby SteveKL » Sat Dec 21, 2013 2:35 pm
With respect for WhyNutUs' opinion, I'm with JohnDoh on this one and hope this thread sparks some good tax-planning ideas and discussion. Not to introduce a political element, but since I cannot paraphrase as articulately as the original quote, this well-known excerpt from U.S. Court of Appeals Judge Learned Hand (1872-1961) in the case of Helvering v. Gregory (69F.2d 809) summarizes my belief:

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."
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Re: ACA Income Tax Planning Strategies

Postby Digital Dave » Sat Dec 21, 2013 2:47 pm
Hello all,
I am one of those that has saved and invested over the years to build a nice nest egg, by spending much less than I could. This has been my nature as an independent person that wants to pay his own way through life. When I lost my job 7 years ago, everything still went smoothly. My employer paid my health insurance for years, and I paid my own after leaving. No pensions, all my income was from my savings and investments.

As I said, I paid my own insurance costs, 100% after leaving work. Now the ACA comes along, that without subsidies would cost me a LOT more, including the co-pays, deductibles and some other pays that I forgot the name of. So I decided it was in my best interest to work for the most subsidies.

I am 63, and have been receiving Social Security starting at 62. I discovered that in 2012, 85% of my SS money was subject to federal income tax. I had realized a lot of gains, forgetting about this extra tax. Things were to change for 2013!

I cut back on my capital gains realizations to the level where just 50% of my SS money would be taxed. Fine. Then I learned the ugly truths about MAGI vs. AGI as it related to ACA. Late this year I suspended my SS money! I would delay this until I was 66 - 70.

Then I decided not to sell anything that would result in a taxable capital gain. There would still be dividends and gains by the funds passed on to me. Also no more Roth conversions! At the end of 2014, if I am below $23000, I'll then realize some gains. (I file as single).

The other part of my grand plan is that I signed up for the "Silver" plan. As I understand it, there are extra subsidies for singles with a MAGI of below about $29k. Being sick, this will cut down on these co-pays, deductibles, etc. and leave me with more to support myself down the road.

By refusing further SS payments, I might have cut off my nose as all the taxes saved wouldn't add up. But being cash heavy, I am spending down on a little more of that (which I am making 0% on anyway), while giving my SS payments in the future a boost. This is kind of a tax-free savings account, and might come in handy later. Of course, this depends on being still alive then, but if not, I won't know the difference anyway.

I hope that made sense. In other words, I'm gaming the tax system and ACA, legally. Happy holidays to all!
Dave
Investing in Mutual Funds, ETF's, P2P Lending and Forever Stamps
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Location: Western New York


Re: ACA Income Tax Planning Strategies

Postby tfb » Sat Dec 21, 2013 4:38 pm
JohnDoh wrote:As discussed in this NYT article "New Health Law Frustrates Many in Middle Class" and illustrated in the incorporated charts, there can be a sharp cost to exceeding the ACA premium credit threshold by "a small amount".

Amazingly they don't mention anything the affected can do to get themselves out of that situation. The media just want to fan the emotions. The lead couple exceed the income cutoff by $6,000. Increase 401k or IRA contributions by $6,000. Problem goes away, but the reporter won't have a story.

JohnDoh wrote:Are there other major strategies?

Income bunching. If you are over, get way over (convert to Roth, realize cap gains, stop contributing to 401k after getting the match, ...). Then use the money to supplement income for the following years (max out all pre-tax savings, as you point out, up to $67k per couple!).
Harry aka TFB, taking a break from the forums.
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Re: ACA Income Tax Planning Strategies

Postby JohnDoh » Sat Dec 21, 2013 5:26 pm
Thanks for all the input so far.
tfb wrote:
JohnDoh wrote:Are there other major strategies?

Income bunching. If you are over, get way over (convert to Roth, realize cap gains, stop contributing to 401k after getting the match, ...). Then use the money to supplement income for the following years (max out all pre-tax savings, as you point out, up to $67k per couple!).

How "way over"? Presumably one wouldn't want to go into the next tax bracket (e.g. 15%->25%). If this is so, then "below-the-line", itemized-deduction-bunching and income-bunching should be synchronized. I.e. in the years when (M)AGI is over the ACA subsidy / tax credit cutoff (not "threshold" as I incorrectly stated in my OP), one should maximize Schedule A itemized deductions (including health insurance premiums and elective / schedulable health expenses) and then bunch above-the-line income to the top of the current tax bracket. This is similar to advice for IRA->Roth conversions. But should one bunch more income if one could?

In any case, we end up with a strategy of alternating years:

SUBSIDY YEARS:
a) maximize above-the-line (M)AGI deductions to qualify for maximum ACA premium subsidy / tax-credit; AND,
b) minimize below-the-line Schedule A itemized deductions and take standard deduction

NON-SUBSIDY YEARS:
a) maximize below-the-line Schedule A itemized deductions; AND,
b) optimize above-the-line (M)AGI deductions such that taxable income (TI) is at the tax bracket ceiling (2014: $36,000 Single / $73,800 MFJ)

Does this sound correct?
JohnDoh
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Re: ACA Income Tax Planning Strategies

Postby SteveKL » Sat Dec 21, 2013 5:35 pm
JohnDoh wrote:In any case, we end up with a strategy of alternating years:
SUBSIDY YEARS: b) minimize below-the-line Schedule A itemized deductions and take standard deduction
NON-SUBSIDY YEARS: a) maximize below-the-line Schedule A itemized deduction

This could dovetail nicely with the practice of bunching charitable donations and property tax payments together in alternating years (what the OP calls non-subsidy years), as discussed in these recent threads on that strategy:

viewtopic.php?f=2&t=127933
viewtopic.php?f=2&t=126963
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Re: ACA Income Tax Planning Strategies

Postby JohnDoh » Sat Dec 21, 2013 6:20 pm
SteveKL wrote:
JohnDoh wrote:In any case, we end up with a strategy of alternating years:
SUBSIDY YEARS: b) minimize below-the-line Schedule A itemized deductions and take standard deduction
NON-SUBSIDY YEARS: a) maximize below-the-line Schedule A itemized deduction

This could dovetail nicely with the practice of bunching charitable donations and property tax payments together in alternating years (what the OP calls non-subsidy years), as discussed in these recent threads on that strategy:

viewtopic.php?f=2&t=127933
viewtopic.php?f=2&t=126963

Yes, though I think one would try the bunching below-the-line Schedule A itemized deductions strategy in any case -- i.e. regardless of whether one was bunching above-the-line (M)AGI deductions. In other words, even if one qualifies for a ACA premium subsidy / tax-credit every year, one would still try to bunch itemized deductions -- although the value of the itemized deduction is reduced because (M)AGI is already reduced and therefore one's tax rate and liability is already reduced. But every bit helps. :beer
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Re: ACA Income Tax Planning Strategies

Postby Mick » Sat Dec 21, 2013 6:22 pm
We have definitely made some changes to maximize our ACA Subsidy. I am 63 so need to plan two more years for both of us and seven more for my spouse. We have taken several steps this year including Roth conversion to next bracket providing an extra cushion of money should we need it. We will also be pulling cash out of our taxable investments to cover known immediate expenses next year (like HSA contribution and others) to take any profit this year. We also elected an HDHP for our coverage with the max HSA contribution moves us from 9.5% of income to about 8.5% and also reduces the income the percent applies to. This will mean we will be able to deduct any medical expenses over about 1.5% of a low income. We will keep the HSA as a backdoor IRA as long as we can deduct medical expenses and eventually use it when we are both on medicare.

So doing a lot of planning, both taxes and for subsidy. I can thank this forum for that. If I had went on the way we were we might have just missed the subsidy line. This approach will save us over $10,000 with the subsidy plus some taxes on the HSA contribution. We currently have no insurance as spouse was denied coverage and I could get it for $1200 but it excluded any heart or cancer related issues. Seemed pointless to pay that much a month for what was left.
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Re: ACA Income Tax Planning Strategies

Postby Brandnew » Sat Dec 21, 2013 6:54 pm
Great topic! My wife and I have recently retired (not old enough for medicare). We paid for our own 2013 health insurance totaling $650 a month for a HDHP HSA plan. Our insurance company said we didn't have to do anything for 2014 ... other than pay $1140 a month ... Ouch. Since we have little in income coming in ... signing up for bronze HSA insurance through the state exchange gave us a $1115 monthly credit with two policies total $982 ... meaning, no charge to us. Now, I don't feel so bad when I pay out of pocket for minor doctor visits.

Strategy for now is to make sure I have enough cash on hand to live on/fund HSA contributions and, if needed, sell a few more equities this year.
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Re: ACA Income Tax Planning Strategies

Postby stratton » Sat Dec 21, 2013 7:00 pm
One really obvious way is to look into paying off the mortgage so as not to generate income. You lose the mortgage interest write-off, but you can reduce income.

Paul
...and then Buffy staked Edward. The end.
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Re: ACA Income Tax Planning Strategies

Postby SteveKL » Sat Dec 21, 2013 7:19 pm
stratton wrote:One really obvious way is to look into paying off the mortgage so as not to generate income. You lose the mortgage interest write-off, but you can reduce income.

Paul, what do you mean here? How does having a mortgage relate to receiving income? I went back through the other posts in case you were replying to someone's specific question, but didn't see it. Thanks!
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Re: ACA Income Tax Planning Strategies

Postby stratton » Sat Dec 21, 2013 7:23 pm
I wasn't clear here.

If you're getting income from investments or even a job you can now not generate it or put a larger percentage into retirement savings if income isn't needed to pay for the mortgage.

The idea is to cut required income by reducing your payout.

Paul
...and then Buffy staked Edward. The end.
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Re: ACA Income Tax Planning Strategies

Postby obgyn65 » Sat Dec 21, 2013 7:53 pm
I have started to buy deferred annuities to defer income until I reach 62. I am 48.
"The two most important days in someone's life are the day that they are born and the day they discover why." -John Maxwell
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Re: ACA Income Tax Planning Strategies

Postby SteveKL » Sat Dec 21, 2013 7:54 pm
stratton wrote:The idea is to cut required income by reducing your payout.


Ah, so. I have thought of that, as well. No matter how thrifty somebody is with their other expenses, if you have a mortgage then the options are either to generate current-year income (active or passive) to make the payment, or to use already-taxed money for that purpose.

If one were trying to get permanently into an income range that could qualify for an ACA subsidy, it seems the only solution would be to have a paid-off mortgage. If using the alternate-year method it could be possible to set aside a year's worth of payments in the higher-income "non-subsidy" years, then use those funds to make payments during the "subsidy year".
SteveKL
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Re: ACA Income Tax Planning Strategies


Postby Mick » Sun Dec 22, 2013 8:08 am

stratton wrote:One really obvious way is to look into paying off the mortgage so as not to generate income. You lose the mortgage interest write-off, but you can reduce income.

Paul


Actually we just did about the opposite. Could have paid off the mortgage but it ate up a lot of our taxable savings. Would then have had to use our IRA for some expenses causing an increase in income and decrease in subsidy. By having mortgage we will be able to use the taxable savings until we start SS. Over the next 7 years we come out much better with this approach. Thus a Penfed 5/5 at 2.625% refi made sense over a payoff.
Posted on 11:15 AM | Categories:

Charity Time: Why Securities Donations Are Great for Taxes

Eric Schall for Wall St Cheat Sheet writes: Though the top tax rates have increased for the country’s biggest earners in 2013, Congress didn’t cut into the deductions individuals can make when donating to charities. That leaves investors big and small with the opportunity to support preferred causes and organizations rather than kicking the money in taxes to the IRS. In fact, donating stock and assets makes greater financial sense in most cases than donating cash. Here are some last-minute moves to consider before January 1.

Security donations deliver more bang

According to Fidelity Investments, investors ought to consider donating securities before writing a check to a favorite charity because of potential tax saving on capital gains. Stocks, bonds, and mutual funds held longer than one year that have gained value would be subject to the new capital gains tax of 20 percent (up from 15 percent) if sold and then donated.

However, if investors simply donated the security, one would be able to deduct the current market value (i.e. including appreciated value) and would not face taxes on that gain. Everyone wins in this situation except the IRS. According to Fidelity, the limit on this type of donation is 30 percent of adjusted gross income, but stocks that have been huge winners — say, Tesla (NASDAQ:TSLA) — should top investors’ lists when it comes to donations.

Tesla investors who considered different plans for the 323 percent the stock appreciated in 2013 would have significant advantages by donating. In one scenario, $10,000 invested before January 1, 2013, would be worth over $42,000 by year’s end. The $32,000 in gains would be subject to $6,400 in capital gains taxes, giving the stockholder $25,600 in profit upon sale. However, donating that $6,400 to charity would not be subject to any tax, should investors qualify. Donations of this sort are no-brainers.
 
If considering a larger donation, all would be available for deductions as long as the amount didn’t break 30 percent of adjusted gross income. Fidelity notes that donating private stock holdings and real estate assets has advantages for investors as well.

Donating private stock and real estate

On the theme of capital gains taxes, investors who started or co-founded companies may be holding large amounts of private stock that had an intial value of zero. Fidelity’s tax experts point to the whale of a capital gains tax burden investors would face should they sell this stock in 2013 or beyond. However, donating that stock (or even real estate) to charity helps retain the majority of its value.

Direct charitable donations of private stock holdings and real estate involve more complex operations for tax planners, but the opportunity remains to save on capital gains taxes in coming years should the situation call for it in 2014. If buyers of private stock are knocking, a swift sale could help one realize the benefits in a 2014 filing to the IRS. As always, consult an accountant to be certain specific holdings qualify for the maximum deduction.

Investors considering options for retirement plans may also see tax benefits by executing last-minute moves in 2013. Tax advisors will likely be working overtime as the days tick off the calendar, so inquire about effective moves to make today that could deliver real savings come tax time. U.S. tax laws offer tremendous opportunities for citizens to support causes dear to their hearts. In the season of giving, it’s a win-win situation.
Posted on 11:15 AM | Categories:

Stretch charitable donations by using tax-deductible strategies

Taxpayers can stretch their charitable donations farther by using tax-deductible strategies before the end of the year. But the process requires some planning and research, as well as some pitfalls to avoid. A big one?
“Make sure it’s a qualified charity,” said Thomas Aromando, a certified public accountant with Fitzpatrick, Bongiovanni and Kelly, which has locations in the Marmora section of Upper Township and in Linwood.

On its website IRS.gov, the IRS has a searchable online database, “Exempt Organization Select Check” that lists most eligible organizations. Also, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations even if not listed in the database, the IRS says.


Donations can come in different forms — from cash, check and credit card to gifts of clothing, furniture and vehicles. For individuals, only taxpayers with itemized deductions on Form 1040 Schedule A can claim them for charitable contributions, the IRS says.
“Always have a receipt if you’re giving a check or cash,” Bongiovanni said.For clothing donations, one of the ways to assess value is “thrift shop value,” what similar items would sell for at a thrift shop, he said.


Meanwhile, a special provision of the tax code is set to expire at the end of the year. This offers the ability of those at least 70½ years old to make charitable contributions directly from IRAs, up to $100,000.


“That’s been big. It helps the charities, and lots of times people may not need the money, but they’re required to take it because of the required minimum distribution rules,” Aromando said.In the U.S., charitable tax deductions trace back to the War Revenue Act of 1917 and were tied to federal income tax rate increases to fund the World War I effort, the U.S. Joint Committee on Taxation said in a February 2013 report. Fearing higher taxes would draw money from charities and increase need for public support, the charitable deductions were a compromise, the report said.


In 2011, charitable giving by individuals reached about $218 billion, according to estimates cited by the U.S. Joint Committee on Taxation, although not all donations were tax deductible. Including corporations, estates and foundations, that overall figure was about $299 billion.A tax deduction for charitable contributions encourages contributions by reducing a taxpayer’s after-tax cost of the contribution.


Consider a $1,000 donation made in 2013.
To a single taxpayer with $28,500 of taxable income who itemizes deductions and is in a 15 percent tax bracket, this $1,000 contribution winds up costing the taxpayer just $850, the report says.


For higher tax brackets, the difference can be more significant.That same $1,000 donation by a single taxpayer who has $479,150 of taxable income and is in the 39.6 percent tax bracket can reduce tax liability by $396, making the after-tax cost of the contribution $604, the report says.
This time of year is an important one for area charities. Donations often surge around the holidays.


“Around the holidays between Thanksgiving and Christmas, they’re in that mode. And a lot of them do make gifts in someone’s honor or memory this time of year,” said Margie Barham, the executive director of the Community FoodBank of New Jersey's Southern Branch in Egg Harbor Township.


Barham said the need is great in the region, as the slumped economy in recent years has affected charitable giving.


“The need’s still there, it’s still growing, but contributions are going down,” she said. “We’re even seeing with our food drives, a decrease in what they’re bringing in.”
Barham said charitable financial gifts are down about 18 percent from July to present compared to a similar period last year. Comparing November 2013 to the previous November reveals a 41 percent decline, some of which, Barham said, represents a burst of giving last year following Hurricane Sandy.


“Times are tough for everyone so when someone does make a charitable gift they are sacrificing a little,” she said. “We very much appreciate people donating and thinking of others because we know that comes as a sacrifice as well for them.”
Barham suggested potential donors research charities using a website such as CharityNavigator.org to gauge where money is being spent.


Federal tax policies have a significant role in charitable giving, and “tax incentives significantly affect how much people give, as well as the timing of their donations and to what causes they give,” Eugene Tempel, cqfounding dean of Indiana University School of Philanthropy, testified before the House Committee on Ways and Means in February.The IRS offers some additional tips on year-end giving.


n To be tax deductible, donated clothing and items such as furniture and appliances must generally be in good condition. Donors must get written acknowledgement from the charity for all gifts worth $250 or more, the IRS says.


n For monetary donations, taxpayers need a bank record or written communication from the charity that reveals the charity’s name, date and amount, the IRS says. Bank records can include canceled checks, bank statements and credit card statements.


n Contributions are deductible in the year they are made; a donation charged to a credit card in 2013 counts for that year, even if the bill is not paid until 2014, the IRS says.
n For individuals, only taxpayers who itemize deductions on Form 1040 Schedule A can claim deductions for charitable contributions, the IRS says.
Posted on 11:15 AM | Categories: