As December 31 fast approaches, you might want to do some simple income tax planning. No one likes surprises after the first of the year when they prepare their tax returns.
How can I minimize my tax bill? If you are charitable person, one way to reduce your income tax is by making deductible charitable contributions. To deduct them in 2011, the payments by check or credit card need to be made before December 31, 2011. The same date applies to non-cash contributions, such as, clothing household items and vehicles.
How much tax can I save? The tax savings vary depending on your taxable income. You could save from 10% to 35% on the value of the contribution. The value for “cash contributions’, those made by check or credit card, is the amount of the check or charge. The value of “non-cash” is the value that the charity realizes when the item is sold. Normally an amount substantially less than the amount you paid when you purchased the item. However, you need to remember that there is a requirement for an appraisal for non-cash donations over $5,000 in value.
Bonus for Michigan Tax Credits (expiring 12/31/11). The State of Michigan provides a non refundable credit for 50% of the value, limited to $100 single or $200 married for each of the following types of charities:
- Michigan Public Charities
- Community Foundations
- Homeless Shelters
The Michigan charitable tax credits are a dollar for dollar reduction of the Michigan Tax.
Please contact us [1] if you have any questions regarding year-end tax planning or would like to know how much you could save on your taxes by making a charitable contribution.