Finding emergency money to pay taxes could be a charity away

Understanding the process of charitable contributions

For consumers looking to build emergency money funds, giving to charity can help. Taxpayers can either donate cash or goods, but each one comes along with some rules via the IRS. For example, if a consumer donates money, they have to have paperwork and documentation to prove it. On the other hand, donating household goods has even more legwork attached. It’s important to know the rules and then use them, but wise consumers who do can, find considerable savings by donating to charity.

Using an IRA direct rollover

For consumers who are 70 ½ or older, they can have money directly moved from an IRA to the charity of their choice. Both traditional IRAs and Roth IRAs allow the move, but it is more beneficial to do it via a traditional type. The reason is that the money in these accounts is taxable, and lowering the balance lowers the tax liability. Money that goes straight to the charity is not considered taxable income when it comes to the IRA owner. The only drawback is that when money is moved directly to a charity from an IRA, it is not deductible by the consumer. It’s a small drawback though, and the difference may be negligible. In order to take advantage of the charitable donations, taxpayers have to itemize their filing. If a taxpayer does a rollover to the charity, the standard deduction still applies.

Household goods donations and taxes

Many charities accept household goods donations and taxpayers are allowed to claim the market value of donations on their taxes. In 2006, a new law was set in motion that requires items to be in “good or better” condition. The reason for the new law was to dissuade consumers from donating their junk and then trying to claim it on their taxes. The other reason is that too many consumers were valuing their items at too high a value and filing for a higher tax break than rightfully they should have. Finding emergency money to pay taxes is possible with the donating goods option, but the goods have to be valuable or the IRS can deem them “minimal monetary value” items and deny the claim. … click here to read the rest of the article titled “Finding emergency money to pay taxes could be a charity away“