Jason Parker interviews Susan Garland about charitable giving.

Susan B. Garland is editor of Kiplinger’s Retirement Report, a monthly personal finance publication for retirees and those approaching retirement. The publication covers all topics related to retirement, including investments, taxes, Social Security, pensions, personal money management, philanthropy, annuities, estate planning, health care, housing and leisure activities.

For 12 years, Ms. Garland was a Washington-based correspondent for Business Week magazine. While on the social policy beat, she covered benefits, poverty, retirement issues, health care and workplace issues. As a White House and national politics reporter, she covered the first term of the Clinton administration. While on the legal affairs beat, she wrote about the Justice Department’s antitrust investigation of Microsoft and the subsequent federal trial. Ms. Garland also has been a freelance writer, and her work has appeared in The New York Times, The Washington Post, Business Week and other publications.

Ms. Garland has appeared on the NewsHour with Jim Lehrer, CNBC, AARP’s Inside E Street, the Nightly Business Report, Retirement Living TV, Fox News and Court TV.

Ms. Garland is a graduate of Colgate University in Hamilton, N.Y. She lives in Bethesda, Md., with her husband, James Feldesman, an attorney.

Below is the full transcript:


Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now, here is your host Jason Parker.

Jason: Welcome back America to another round of sound retirement radio. I’m so grateful to have you here. Hopefully you guys have just enjoyed a wonderful Christmas break with your family and you’re on the road to either do something fun, maybe you’re going to go see Star Wars, or maybe you’re heading to family’s house to have a nice dinner. I don’t know what the case is, but if you’re driving down the road here in Seattle this morning, Merry Christmas. I have a couple of jokes that I’d like to share with you. The first one is, “What do you call an old snow man?” “Water.” (Laughs). And then the second joke is, because i know one bad joke isn’t enough, “What did one snowman to the other snowman?” “Do you smell carrots?”. (Laughs) Oh, I love that. I always wanna renew our minds in the morning.

 I’ve got a verse here, this goes right back to Christmas and the reason that we’re celebrating this comes from Luke Chapter 2 verses 8 through 12. “And there were shepherds living out in the fields nearby keeping watch over their flocks at night. An angel of the lord appeared to them and the glory of the Lord shown around them and they were terrified but the angel said to them, ‘Do not be afraid. I bring you good news that will cause great joy for all people.’ Today in the town of David a savior has been born to you he is the messiah, the lord. This will be assigned to you. You will find a baby wrapped in clothes and lying in a manger.”

 Alright with that we’re going to get started. As you know, we’re always looking to bring experts onto this program that we believe can add expert advice to your financial life, especially as you’re preparing for and transitioning through retirement … that you’re listening to episode 075 so if you’re driving down the road and you’d like to review the show notes online you can just go to soundretirementplanning.com and look for episode 075. We’re going to be talking about charitable giving and I have the good fortune to bring Susan Garland back onto the program. I’ll give you a quick bio to remind you who Susan is. Susan B. Garland is editor of Kiplinger’s retirement report, a monthly personal finance publication for retirees and those approaching retirement. The publication covers all topics related to retirement including: investments, taxes, social security, pensions, personal money management, philanthropy, annuities, estate planning, health care, housing, and leisure activities (my favorite one of all) (laughs). Susan Garland, welcome back to Sound Retirement Radio.

Susan: Well thank you so much.

Jason: I really appreciate you taking time out of your busy schedule, especially this time of the year to be a guest on the program. I know that congress recently passed some legislation that’s going to make a big impact for people that give to charities. Can we start of maybe talking about what just happened in congress?

Susan: Of course. This is the very popular tax strategy. IRA to charity tax strategy. And this enables people who are 70 and a half years old or older to be able to directly transfer money from their IRA to charities of their choice. Up to 100 thousand dollars and that money counts as part of their required minimum distribution. And every year congress waits until the last minute and we get calls from our readers saying “has it happened yet? Has it happened yet?” And I have to say “no, not yet”. So finally they’ve done it and the best news is that it’s permanent. So people don’t have to worry about it anymore. So this way it’s sort of been a wash in a way.

 When you direct transfer from the IRA to a charity, you basically are reducing your adjusted gross income. You’re getting the tax deduction. But this is great because it does reduce your adjusted gross income which means you may not quality for the income related medicare premiums and so forth and it makes life very easy for people. So if you haven’t taken your required minimum distribution from your IRA, you can make this, and you want to give to charity just call your IRA custodian and make sure the charity knows you’re going to be doing this so you’ll have a free flow of money from one place to another.

Jason: Susan I want to just go into a little bit more depth on this because this is such a powerful planning concept, like you say. And every year now for the past several years now it’s been one of these things where we all hold our breath wondering if congress is actually going to extend the charitable contributions from an IRA for people over 70 and a half. So out of curiosity, for our listeners, I just wrote a new piece on this. So when you go to the show notes of episode 075, I’ll include a link to the article, where I go through a hypothetical scenario to look at what happens if you give from your IRA directly to a charity versus just taking a required minimum distribution and then hoping to itemize that on schedule A of your tax return.

 And like Susan was just saying, this can really be powerful because it does adjust your adjusted gross income so things like paying additional medicare premiums, you may if you’re a high income earner it may help you not pay as much money for medicare premiums, it also impacts provisional income rules so it may impact the amount of your social security that’s taxable. I mean this is just a really powerful thing. So again, episode 075 under the show notes I’ll include a link to an article, a case study that I did to look at this. Susan how can people make sure, because not every charity or charitable idea is available for this type of contribution, how can people double check to make sure their charity qualifies?

Susan: Well, any charity you have whether it’s [inaudible 00:06:38] or just to make a tax deductive charitable donation, you need to make sure that the charity basically is tax exempt organization. Not all charities are. You get lots of stuff in the mail and you hope for the best. So what you want to do to make sure your charity is tax exempt, is you go to the irs.gov and you look for the database of exempt organizations. I don’t want to read the whole site here because it’s sort of mind numbing. But if you go to the irs.gov and you put into the search engine “exempt organizations” you will get the whole list of every charity in the country. Churches. You name it. Arts organizations. That are tax deductible. Obviously you want to give to charity but its nice to get a deduction as well that you can get by giving in a way. So that-

Jason: That’s a great-

Susan: That’s your first tip. And also-

Jason: Oh I was just going to ask you if you would be so kind. If you would email us over the link to the IRS portion of the website where you just mentioned people could check that. We’ll include that in the show notes for our listeners as well. That would be very helpful.

Susan: Okay, you want me to read that out to you?

Jason: Oh, no, if you’ll just email it to us we’ll include it in the show notes.

Susan: Oh of course. Yes. Absolutely. Yes. And the other thing to is there are a lot of charities out there and you get a lot of mail you get a lot of appeals on the radio, no offence, and on TV and you get calls from people too it’s that time of the year. You really wanna make sure that the charities that you’re giving to are putting your money to good use and are legitimate and so forth. So one place to go is, there’s some watchdogs out there, one is charitynavigator.org and they look at the finances and also sort of how transparent the charities are. Are they giving out the information that you need? And they’ll look at how much of the money is being given to the services versus how much is given for overhead administrative cost. It doesn’t tell you everything but it does tell you some things.

 Also if you want give to local charities and you’re not quite sure which one. There’s 750 community foundations out there. They do a lot of betting of charities so that’s another way to go to to make sure that this is a group of people, it’s staff that are looking at worthy groups, so you could check charities through them as well. And then you could also honestly, they should have a website, these charities, they have an annual report, you can see what their mission is, you could look at all their information on their accounting and so fourth. So you wanna dig a little deeper and a lot of of umbrella groups out there and different communities too. Whether it’s United Way or whatever they also look at the charities before they accept members for their collaborative groups. So there are a lot of way to check things out. Better Business Bureau has a wise giving site. So good thing to do before you just write a check.

Jason: For our listeners out there, if you’re just tuning in, you’re listening to episode 075. I have Susan B. Garland, editor of Kiplinger’s retirement report on the program. We’re talking about the qualified charitable distributions. Congress just made this. President Obama signed it into law. A permanent portion, a permanent part of the tax code. We don’t have to guess about this anymore. It really creates an amazing opportunity, especially if you’re out there and maybe you’re in church leadership through your church. This is something you want to definitely educate your members about because you’ve got a lot of people that are good stewards, they’re good tithers, and if they understand that where they get that money from can help them reduce their overall tax liability, this is very important. There is really a great opportunity to be had. Now, Susan, I know there are some exclusions, things like donor-advised funds and charitable annuities. Things you don’t want to be looking at. We talked just briefly about some of those things.

Susan: You cannot use this maneuver for donor-advised funds. I mean, it is something else that people should know since it is the end of the year and this is something that you will remember for next year since it is permanent. If you already made your required minimum distribution, you can still direct your money from the IRA to charity, but it cannot count for your distribution because you’ve already made it. For next year, if you’re sick and if you want to sort of tie everything together, then keep all this in mind. You can do that, so called RMD, minimum distribution, and have the IRA directed to charity. Lets say you have a minimum distribution of like, 10,000 dollars. You want to give to charity 10,000 dollars or 30,000 dollars. So you direct your IRA custodian to send the money to your charity and you’ve already taken care of your required minimum distribution. That means you don’t have to pull the money out and pay tax and then take reduction for your charitable contribution.

 It’s just one smooth ride, but donor-advised funds do not count, but if you’re at the last minute now, there are a number of things you can do if you haven’t given to charity yet.  Let’s say you don’t want to do the IRA to charitable distribution-

Jason: Hold that thought. Susan, hold that thought before we go any further. I just wanted to clarify something you just said there that I think is important. I wasn’t sure about this. I know that you can give the required minimum distribution, but from what you just said it sounds like you can make a gift, even above and beyond what the minimum is. If you had to take 10,000 dollars out, in your example, you said you can give as much as 30,000 dollars from your IRA to a charity. What’s the maximum amount that somebody can give from their IRA to their charity and avoid having that hit the front page of their tax return.

Susan: You can give up to 100,000 dollars.

Jason: 100,000 dollars-

Susan: 100,000 dollars. Yes. So most people aren’t going to give that kind of money unless just really wealthy but you can do that if you want. And it’s part of your RMD. If your RMD is 20,000 then you would satisfy that RMD without having to put they money up directly.

Jason: But your understanding is you can give above and beyond what their RMD is. So if your RMD’s 20,000 and you wanna give 30,000, you can still give that gift even though it’s above and beyond what the RMD amount is.

Susan: Yes.

Jason: Ah that’s great. Okay I’m sorry.

Susan: Yeah. The thing to do. But if it’s getting late in the game for you here you could either send your checks, make sure you get those checks in the mail before December 31st, if you’re waiting really to the last second you could put your donations on a credit card and even if you’re paying the credit card bill after this first of the year, as long as it’s posted on your credit card before December 31st you’re okay as far as being able to deduct that in 2015 [crosstalk 00:15:06].

Jason: Now that’s different. That’s different that … you talked about giving via a credit card but that’s different than this IRA gifting that we’re talking about. We just wanna clarify that for our listeners.

Susan: No. I’m just expanding. I’m not talking about the IRA to charity thing. I’m talking about just the end of the year time to give and here are some things you can do if [inaudible 00:15:36] if you don’t qualify for this or you don’t wanna do that maneuver maybe you don’t feel like it but if you’re just doing your regular old giving, make sure of those deadlines. And there are a lot of different options you could pay by credit card, you go right on the site of these charities and you can pay using credit card. You can pay these charities. And also too a lot of people like to give away … it’s the time of year sometimes are cleaning out their closets they’re giving away old coats and people do their spring cleaning but they also do their winter cleaning and you want to give away some stuff. You just can’t willy nilly take a tax deduction for that. You have to make sure that … keep a close accounting of the things you’re giving away and then you have to make sure that you take … they have to be in good condition that’s what the guide is from the IRA. They have to be in good condition and basically that rule of thumb is “would you give this to a friend or a relative?”

Jason: So that person that’s got the couch that they’ve had sitting out on their sidewalk for the last couple weeks (laughs) they can’t turn around give that.

Susan: Yeah. Exactly. And the birds have come by and done all that. No. You’re not going to be able to give that away and be able to take a tax deduction. You have to think about if people would really want something like that anyway. But also you need to get valuation and the best way to get a good valuation is the Salvation Army has a list of, you know on the pan they’ll tell you how much it’s worth. A tee shirt, a jacket, a coat, pairs of shoes, beds, whatever. And they will tell you what the valuation is. Goodwill has the same thing. Or you could go to eBay and see what these things are selling for. And then when you do your tax return next year, you’ll have that list already there. Also make sure you get receipts from the charity that you’re giving your stuff to.

Jason: Susan, that brings up [crosstalk 00:18:23]. Well you brought up a good point in terms of record keeping because I know that the IRS has really clamped down on record keeping. So give our listeners some real guidance here on what they need to make sure that they’re doing if they’re going to be making these gifts and so that they qualify and if they’re going to try and take a tax deduction what they should hold onto.

Susan: Exactly. So make sure that if you give your stuff away, like stuff, like items, that you should get a receipt right then when you’re doing it and often times they’ll fill it out but you can just fill it out what you’re giving. And you can get a deduction of a single item that’s not in good condition but the item has to be valued at more than 500 dollars. You have to attach an appraisal and a form 8283 with the return. So what would be an item that’s wroth more than 500 dollars that not in good condition? I mean you’re not going to get it for that old ratty couch, it’s not 500 dollars in the first place. But let’s say you have a vintage wedding dress, designer wedding dress, and you donate it to a museum, that would be something that may not be in the best condition but it’s worth something. But you have to get it appraised and you have to fill out form 8283 so that’s one example.

Jason: Boy that seems like a lot of work.

Susan: And you cannot … well I mean but you get that 500 dollar tax deduction.

Jason: Only if you- only if you- [crosstalk 00:19:57]

Susan: It’s not bad.

Jason: It’s not bad if you can actually itemize. So with the standard deduction-

Susan: Yeah, obviously.

Jason: Yeah so for some people out there it may not be worth all the headache and hassle if it’s not going to be worth more than their standard deduction.

Susan: No, obviously. If you’re going to be itemizing you don’t wanna go through all this trouble you have to sort of make that calculation. And if you’re giving cash contribution it’s not just dollars out of your pocket. If you go by the Salvation Army bell ringer and you put in a few dollars you’re not going to really … you might be able to write it down, keep a temporaneous record, but that might just be dollars out of your pocket but if you’re giving a credit card contribution, nothing in cash, you have to have a canceled check, bank statement, credit card statement, or a receipt from the organization and so make sure when you give that credit card, let’s see you’re giving 100 dollars to Doctor’s Without Boarders, they should be sending you a receipt or it will come up on your credit card receipt too.

Jason: Somewhere. So what about deducting out of pocket expenses for volunteering. Can people deduct any out of pocket expenses for volunteering?

Susan: Well you can deduct the amount of money you spend. Let’s say you are baking a pie. You can deduct the items; the flour and all that stuff. You can deduct the time it takes you to, let’s say you’re driving your car, you can deduct the 14 cents a mile. It’s the charitable deduction for driving. But you cannot deduct the value of your services. So let’s just say you normally charge 100 dollars an hour. You’re self employed and you charge [inaudible 00:22:05] an hour for your business and you put in like 10 hours for charitable work. You cannot deduct that 1000 dollars. That’s free time. You cannot deduct it but you can deduct the cost of supplies and let’s say you bought for a fundraising event. That you can deduct. But you need to keep a record of that. So keep a record when it happens.

Jason: Okay.

Susan: A little journal so you can remember that and the IRS never questions it. You can say “Look here this is. I did it on that day and my computer shows the date that I wrote this or whatever.” [crosstalk 00:22:50]

Jason: Folks if you’re just tuning into the program, you’re driving down the road in the Seattle area, I want to remind you you’re listening to episode 075. I have Susan B. Garland on the program with us today. We’re talking about charitable giving. We’ll have all the show notes online for you. And I also wanna remind our listeners for a special time up until December 31st of this year if you have not yet read my book, if you’re thinking about retirement within the next couple of years and you’re wanting to know what a good retirement plan would look like visit soundretirementplanning.com/radio. You can request a free copy of my book until December 31st. Susan there’s a lot of people out there that wanna learn more about the work that you’re doing. What’s the best way for them to connect with you online? In 30 seconds.

Susan: For the retirement report, if you want to subscribe it’s a multi complication personal finance retirees and pre retirees and you can go to kiplinger.com and you can go to the shop. You can subscribe. It’s 30 dollars a year every month. So we have lots of good information.

Jason: Awesome. Thank you Susan Garland for being a guest.

Susan: Thank you so much.

Announcer: Information and opinions expressed here are believed to be accurate and complete. For general information only and should not be construed as specific tax, legal, or financial advice for any individual and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program. Parker financial, it’s representatives, or it’s affiliates have no liability for investment decisions or any other actions taken or made by you based on the information provided in this program. All insurance related discussions are subject to the claims ability program. Investing involves risk. Jason Parker is the president of Parker Financial an independent fee based wealth management firm located at 9057 Washington Avenue Northwest Silver dale Washington. For additional information call 1-800-514-5046 or visit us online at soundretirementplanning.com