From Miss America to Income Taxes…Miss America was Better

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We all know that we don’t give to the Rotary Foundation in order to get a tax break, but on the other hand, the fact that Uncle Sam subsidizes our charitable giving is “better than a stick in the eye.”  So, knowing that my last Ready, Fire, Aim post featuring 2011 Miss America, Teresa Scanlon, elicited more comment than any other post this year (for reasons unknown)  I now will make a few brief comments about income tax planning…a topic sure to create a veritable tidal wave of interest.   This post will probably go the Rotary equivalent of “viral.”

I can’t give tax advice in this blog, but if you make enough money to know what a deduction is, then you might consider making your donation to The Rotary Foundation before December 31 so you can take a charitable deduction this year.  If you are eligible for a charitable deduction (many Rotarians are but if you are not sure check with your tax advisor) then the value of the deduction depends on your tax bracket.  If you have $72,500 of taxable income in 2013 your tax bracket is 25%, so your tax deductible $200 check to TRF really costs you only $150 because your deduction is worth $50.  The highest tax bracket for 2013 is 39.6% on more than $400,000 of income, so the deduction for a $200 contribution would be worth $79.20.

There is a difference between your Rotary Club’s fiscal year and the IRS’s calendar year, that presents something of an issue between your Club’s Rotary Foundation Chair and your accountant.  While your Foundation Chair (and yours truly) would be quite happy to accept your TRF contribution any time prior to June 30th and have it count for 2013, unfortunately your CPA will disagree.  Don’t be confused about your 2013 tax planning and your 2013 EREY (Every Rotarian Every Year) contributions.  If you want to take your charitable deduction this year, be sure to make your contribution to the Rotary Foundation by December 31.

For those gluttons for punishment who want to read more about charitable tax planning, I present two links below.  One is to a recent post by Barbara Ristow, Pinnacle Advisory Group’s Financial Planning Director.  (NOTE:  Rotary DOES have a Donor Advised Fund) The other is a link to an article by Michael Kitces, Pinnacle Partner and Director of Financial Planning Research, and by all accounts one of the best tax minds in the U.S.  You can read more from Michael at his Nerd’s Eye View website,  www.nerdseyeview.com.

Ristow:  http://www.pinnacleadvisory.com/2013/12/tax-benefits-charitable-giving/

Kitces:   http://www.kitces.com/blog/why-the-phaseout-of-itemized-deductions-should-not-discourage-charitable-giving/

 OK…..now back to our regularly scheduled post Christmas programming.