By Ellie Kay
In the best-selling children's book, "The Giving Tree," the story begins: "Once there was a tree... and she loved a little boy." (Shel Silverstein, Harper Collins, 2002) Every day, the boy would come to the tree to eat her apples, swing from her branches or slide down her trunk - and the tree was happy. But as the boy grew older, he began to want more from the tree, and the tree kept giving and giving.
This is a tender story, touched with sadness, aglow with consolation. The two central themes are unconditional giving and unmindful acceptance. Shel Silverstein leaves some meaning of the book open to interpretation, as it ends with nothing left of the tree but a stump. You could interpret it as (1) the tree gave too much; (2) the boy, who became an old man, took too much; or (3) the tree was happy in giving until it could give no more. You might even have a different interpretation of your own.
Many Americans are generous, and giving peaks during the holiday season. What better time than Christmas to put giving into practice in ways both generous and tax-smart? Here are some ideas to get your family started.
Donate to your local church and community. Many non-profit organizations help teach spiritual values, run kids summer programs, provide food and clothing to orphanages, and send money to disaster victims such as those displaced by hurricane Katrina. Obtain tax-deductible receipts for all donations to any non-profit organization, including homeless shelters, Goodwill, Salvation Army and agency thrift shops.
Double up. What if you're just getting started and don't think you'll have enough deductions to itemize on your income tax return? You could "double up" on your giving by deferring until January 2006 the year-end gifts you would otherwise provide in December 2005. Then give your regular gifts in December 2006. This "doubling up" likely will give you the amount you need to itemize.
Don't fund fat salaries, fancy overhead or excessive fundraising expenses. The Better Business Bureau's Wise Giving Alliance helps donors make informed giving decisions through its charity evaluations, "tips" publications and quarterly "Wise Giving Guide." You can access this information by calling (703) 276-0100 or going to Give.org.
Detailed recordkeeping pays off. If you itemize, you'll need all receipts for donations of $250 or more. If you give away more than $250 worth of clothing throughout the year, you should have saved all receipts for tax purposes. The money donated directly to a needy person is not deductible. It would be better to donate the amount anonymously to your church and have it send the donation to the family in need. Check with your tax specialist for your state and federal tax laws.
Start your own "foundation." If you are fortunate enough to have a large gain from a stock or mutual fund held for more than one year, consider using it to become essentially your own "foundation." For example, if you own $5,000 worth of stock that you bought years ago for only $1,000, then you can donate the stock by setting up a Fidelity Charitable Gift Fund account (1-800-682-4438). By doing this, you get an immediate $5,000 tax deduction and do not pay taxes on the $4,000 gain. As that $5,000 grows through the years, you will instruct the company that manages your "foundation" where to donate the proceeds. Charitable gift funds also are available thorough Vanguard (1-888-383-4483) Schwab (1-800-746-6216) or Schwab Charitable.
Kid philanthropists. You may want to allow your children to manage a donation in a pre-determined amount ($25, $50 or whatever you have budgeted). They are able to research a variety of non-profit groups and decide which one will receive their donation, then you donate the amount in your child's name. You get the tax benefit, your child gets the thank-you note, and both of you will feel good about giving.