When times are tough, you can't afford to waste money. But for most people, giving up on supporting worthy causes through charitable gifts simply isn't an option.

So if you're still planning to give, make the most of your gift with some twists on a few simple rules of thumb.

Give stock to charity? Maybe yes, maybe no
In past years, a great way to make charitable gifts was to give shares of stocks rather than cash. By giving away stock, you could effectively get a double tax break: You not only got a charitable deduction for the amount of your gift, but you also avoided having to pay taxes on any gains since you'd bought the stock.

That method has worked well for wealthy philanthropists like Warren Buffett, who has funded his charitable gifts largely from personal holdings of company stock. That combination can give high-income taxpayers nearly 50% savings.

But now that the market has fallen sharply, you have to be careful with gifts. In particular, watch out for these pitfalls:

  • Short-term gains. Giving away stock you've owned for less than a year doesn't give you a full tax break. If the value of the stock has gone up, you only get to deduct what you paid -- not what the shares are now worth.
  • Losing stocks. If you have a loss on your shares, it's smarter to sell them and give away cash. That way you keep the benefit of a capital loss.

Make a difference with your retirement
Another option that those over age 70 1/2 have is to make charitable gifts using money from their IRAs.

Although distributions from IRAs are usually taxable at your normal marginal rate, a recently extended IRS rule lets you avoid that tax if you direct the money to charity.

Now, you don't get to deduct such donations a second time -- you simply don't include them in income, which amounts to the same thing. But it's particularly useful in a couple of cases:

  • Non-itemizers. Typically, to get a charitable deduction, you have to itemize on your tax return. Those who use their IRAs to give, however, don't have to worry about that -- they just never include the IRA money as income as they'd otherwise have to do.
  • Minimum distributions. Although seniors don't have to worry about taking minimum withdrawals from their IRAs in 2009, they typically do. Charitable IRA distributions count toward these minimum withdrawals, which can help make dealing with minimum distribution requirements a lot simpler.

Most people have no shortage of great causes they support. It's important to maximize the value of the donations you make. By keeping track of how best to make your gifts, you help not only others but also yourself.

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