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Gifts to charity: year-end tax strategy

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in Small Business Tax,Small Business Tax Deduction Strategies

The tax law permits you to deduct the full amount of most charitable donations if you’ve kept proper records. Therefore, if you donate cash or charge a contribution to a qualified charitable organization before the end of 2009, the donation is deductible on your ’09 return. It doesn’t matter if you don’t actually pay off the credit card charge until 2010.

Generally, you can deduct the fair market value of donated property that has appreciated in value if you’ve held the property for more than a year. For example, if you own artwork you acquired for $5,000 that is now worth $10,000 and you donate it to a museum, you can deduct the full $10,000. Obtain an independent appraisal of the fair market value.

Strategy: Donate securities that you have held for more than a year and that have appreciated in value. Reason: You can deduct the full fair market value of the securities without ever paying tax on the appreciation. If you sell the securities and donate the proceeds instead, you will have to pay tax on the long-term capital gain.

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