Want to lower your tax bill? Try making a charitable contribution. Even with all the changes in the Federal Tax Code, the IRS still allows you to deduct charitable contributions if you make them to a qualified organization and itemize your deductions. Whether you want to donate money, or real property like a car, truck or RV, the following 8 tips are an effective roadmap for lowering your taxes by making charitable contributions.

1: Make Your Donation by the Numbers… 501 (c)(3). Nobody wants the IRS to disallow a deduction. If you want to avoid having the Internal Revenue Service throw your deduction out, be sure you contribute to a qualified charity. Want a sure bet? Make your donation to a 501(c)(3) organization. If you want to deduct it, donate to a charitable organization - you can’t deduct donations to individual people, political parties or organizations or anyone running for office. If you want more information about organizations you can give a tax deductible contribution to, go to the Internal Revenue Service website and download Publication 526.

2: First you itemize, then you get the deduction. You can’t have one without the other. You have to file Form 1040 (the long form) and itemize your deductions on Schedule A.

3: Put it on your return if you get anything in return. If the charitable organization you donate to gives you anything when you contribute, like one of those free vacation vouchers some car charities for kids offer, you need to be certain you subtract the value of whatever you get from the amount of your donation. You can only deduct the amount left over. That’s true whether you get goods or services in exchange for your contribution - gift cards, merchandise, tickets or vacation vouchers. Keep everything on the up and up and you’ll be fine.

4: How much can you deduct? It depends on what you donate. Stock or other non-cash property can ordinarily be valued at fair market value when you donate it to a charity. Used appliances or clothes should be in good condition if you want to deduct your donation from your tax bill. Do you want to donate a used car, truck or other vehicle? Reputable charities like Volunteers of America (CarsHelpingPeople.org) will give you the paperwork you need to file for your tax deduction.

5: If you know the fair market value of your donation, you probably know how much of a tax deduction you can claim. Fair market value is the term used for the price someone who wants to buy property, a vehicle or an item would pay you for it, if both of you have all of the facts of the property, item or vehicle are known and neither of you have any outside pressure to buy or sell.

6: Without a record, the IRS won’t play. If a charitable donation you want to deduct from your taxes is a monetary gift like cash or a check, you are required to have a record of it that the IRS will accept. Acceptable records include bank records, a payroll deduction record or a printed receipt from the charity with the name of the charity, along with the amount of your contribution and the date it was made. There are times when you can make a donation to a charity with a text message on your phone. If you make a donation via a text message, you can use your phone bill as proof if it shows the name of the charity you donated to, along with the date and amount.

7: Records - The ‘B’ Side. If you contribute property or cash that is worth $250 or more to a charity, you need the records outlined above. You will need to show payroll deduction slips, a bank statement or record or a receipt showing the amount of your monetary contribution, or a description of the property you donated. The record or receipt will also need to reveal whether the charity gave you goods or services when you made your donation. In many cases the same documentation can feature written description of monetary gifts in addition to the required acknowledgement for gifts worth $250 or more. If your total non cash contribution is over $500 for the year you must fill out IRS Form 8283 and include it with your return.

8. Feeling extra generous? This note is for you. If you donate items or property valued at $5000 or more you have to complete Section B of Form 8283. To do that usually requires a professional appraisal.

Every cloud has a silver lining. There are two sides to every coin. The knife cuts both ways. The dire state of the economy has given rise to some of the best church stewardship opportunities seen in decades.

The Internal Revenue Service uses the “Section 7520 Rate” — commonly called the AFR — to calculate the income tax deduction you receive for a planned giving contribution to your church.

In March 2007, the AFR was 5.8%. It dropped to 3.6% in March 2008. In February 2009, it reached the lowest rate since it first went into effect in 1989: 2.0%.

But what, you ask, does this have to do with church stewardship? A great deal! Here’s an example.

If you are 75 years of age, and you have a $50,000 CD which pays 4%, you earn interest of $2000 per year. But that interest is taxable. Let’s assume that you are in the 15% tax bracket. Your tax will be $300, leaving you net earnings of $1,700. This is what you can take to the store to buy groceries.

You need more income. You have applied church stewardship principles to managing your money for most of your life. You would not be opposed to increasing your income and helping your church at the same time. In meeting with your financial planner, she suggests you look at a charitable gift annuity (CGA).

Church stewardship planning with a charitable gift annuity is a very simple, but effective way to plan. Here are the benefits of moving the $50,000 from a CD to a CGA:

1. Your income will increase from $2,000 a year to $3,150.

2. 78.7% of the $3,150 is not subject to tax. Bottom line: More money for groceries.

3. When you die, your church receives the $50,000. You accomplish the goal of leaving a significant church stewardship gift.

Let’s change the assumptions a little. Let’s say you were age 75 in March of 2000 and set up the same CGA when the Sec. 7520 rate was 8.0%. The amount excluded from tax would have been only 53.7%. Putting this church stewardship plan if effect today means you pay less income tax and have more money for to spend.

The take-a-way from this is that if you are interested in increasing your income, reducing your taxes, preserving your estate from undo taxation while simultaneously helping your church, it would be prudent to examine the various church stewardship techniques which may apply to your situation.

If you represent a church and are interested in raising more money for your ministries, it would be wise to communicate and publicize the church stewardship charitable plans that currently have high value due to the low AFR.

This is only one of several examples of how a church stewardship program and an individual member can benefit from a bad economy.

If you are thinking about making charitable contributions to your church, you need to be aware of some factors affecting deductible donations. Some changes in the laws were made as a result of stipulations of the Pension Protection Act of 2006. These include:

– Charities must be IRS approved.

– Restrictions on tax deductions for different types of charitable contributions.

– Regulations regarding documentation of value for different types and values of items donated.

– Penalties for over-valuing a deductible donation to charity.

– How to deliver the gift and when it is deemed a completed gift.

The purpose of this article is to outline the current regulations governing four common categories of charitable contributions commonly considered deductible donations to churches.

Cash

The clearest guidelines apply to cash gifts. Any amount you give can be used to claim a deduction for a charitable contribution. You are allowed to take a deduction for amounts given to churches because churches and other religious organizations qualify as public charities. Tax law limits the amount you can deduct, however, to 50% of your Adjusted Gross Income (AGI).

Stock, Bonds, Real Estate and Other Real Property

If you own the asset for more than a year, you can take a donation deduction for a charitable contribution at its fair market value. For real estate, however, you will be required to base your deduction on a cost basis under certain circumstances.

If you have owned the asset for less than a year, its sale would produce ordinary income rather than a capital gain. The deduction for which you are eligible would be limited to the cost basis. Other types of contributions must also be calculated on a cost basis, such as a work of art donated by the artist or inventory donated by a manufacturer or merchant.

As an example of a gift of inventory, my church has an annual shoe drive to benefit children. If the owner of a shoe store donated 50 pairs of shoes, the charitable deduction would be limited to the cost basis, not the retail price.

Series E and EE Bonds

A charitable contribution of bonds to your church is a bit more complicated. During your lifetime, you cannot transfer ownership of Series E or Series EE Bonds to a charitable organization. The bond must be cashed (by you). You would be required to pay tax on any gain because interest earned is deferred, like an annuity. Then the remainder can be contributed to the church or charity.

Planes, Trains and Automobiles

There are new rules, which became effective January 1, 2005 in order to qualify for the car donation deduction.

If the charity doesn’t have a use for the vehicle donated and sells it, the charitable deduction is whatever they get for it or the fair market value, if lower. However, if the charity fixes it up, uses it or plans to give the vehicle to a needy person, the charitable tax deduction is the fair market value.

Charitable Contributions Caution

Before you make any gift, you should consult with a qualified tax professional. Furthermore, some gifts may not be acceptable to the church or have to pass through a review process (life insurance is a good example). Therefore, in these situations bring the church into the charitable donation process early on as well.

A Charitable Remainder Unitrust (CRUT) is used to provide an income to a non-charitable beneficiary while at the same time transferring the remainder interest to a qualified charity.

The donor would irreversibly transfer securities or property to a trustee. The trustee would then pay the donor (or other income beneficiary) income from the property for life.

A CRUT also guarantees that if the donor dies before their spouse they could receive income from the donated property of life. The donor would be compensated based on a fixed percentage of the fair market value of the assets placed in the trust. The assets would be revalued annually.

Further Contributions

The CRUT differs from the Charitable Remainder Annuity Trust (CRAT) because it may continue to collect assets in later years and the stream paid out must be a minimum of 5% of the yearly reappraised value of the corpus.

Accordingly, the CRAT disburses a fixed sum of income that never differs in amount, while the CRUT, depending on the reappraised value of the corpus and accumulated income, may issue greater or lesser amounts of income.

Appreciation

The quantity of the payment to the non-charitable beneficiary can increase each year if the value of the corpus and income continues to appreciate. For that reason, the CRUT is an efficient method of fighting inflation. On the other hand, if the value of the assets continues to decrease in value over so many years, the CRUT may actually pay less income to the non-charitable beneficiary than was initially proposed.

If a grantor requests to guarantee a yearly increase in the value of the income payment to the non-charitable beneficiary, the grantor should finance the corpus of such a trust with assets that pay a guaranteed rate of return.