Donating to charity is a holiday tradition for many Americans. While the money you give is aimed at doing good for others, if you itemize on your tax return, your donation can also do good for you.

With the new Congress and incoming president considering ending some deductions in return for a lower income tax rate, giving this year may provide you with a bigger benefit than waiting until next year.

There are many ways you can give to charity—by donating cash, appreciated stock, real estate, cars, or other items—and get a nice break on your taxes. Here are three smart ways to consider. In all cases, the recipient must be an IRS-qualified public charity for you to get a tax break.

Donate Appreciated Stock

With the stock market at record highs, donating appreciated stock to a charity can be much better for your tax bill than donating cash. To do this, you transfer ownership of the stock you are giving away directly to the charity. The charity then sells the shares for cash.

"You get the full deduction of the fair market value of the stock and you’re not taxed on the gain," explains Tom Wheelwright, a certified financial planner and chief executive of ProVision, a wealth management company based in Phoenix.

It’s a good deal for the charity, too. Because charities are tax-exempt, they don't pay taxes on the donation of stock or its eventual sale.

This strategy can result in significant savings for you. Say you're in the 25 percent tax bracket and plan to donate $3,000 in stock that has appreciated by $1,000 since you bought it. If you sell the stock before you donate, you can deduct the $3,000 and cut your taxes by $750, or 25 percent of the stock’s value. But you'll also pay capital gains tax on that $1,000 gain; at a 15 percent rate, that's $150. Your net tax benefit, therefore, amounts to $750 minus $150, or $600.

But if you donate the appreciated stock directly to a charity, you'll get the $750 tax deduction and avoid capital gains tax. So your net tax benefit would be $150 more.

If you plan to use this strategy, you may want to do it now instead of waiting until the last week of the year. Wheelwright observes that stock prices sometimes dip a bit at year-end as tax-conscious investors sell securities.


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Donate Directly From Your IRA

If you're 70 1/2 or older and haven't completely withdrawn the annual minimum distribution you're required to take from your IRA, donate the rest of it (or all of it) directly to a charity. This is known as a qualified charitable donation. If the donation is for $100,000 or less, the contribution counts toward your annual required minimum distribution but doesn't get added to your taxable income as a distribution normally would.

Couples making a donation of more than $100,000 a year are in luck, notes Michael Kitces, a certified financial planner based in Columbia, Md. He notes that if you’re married, each taxpayer can give up to $100,000, as long as those funds come out of his or her own IRA.

IRA distributions are taxed as regular income, so the more you can reduce your total income through donations, the less tax you'll pay. To ensure you avoid taxes on your gift, make sure the distribution goes directly to the charity. 

Give Through a Donor-Advised Fund

A donor-advised fund is an investment account into which you transfer securities or other assets—cash, real estate, private business interests, private company stock—that you intend to donate. The transfer is considered a donation, and the money is no longer legally yours.

The benefit of giving this way is that you can fully deduct the fair market value of the amount you put into a donor-advised fund for the year of the donation, but dole out those assets to the charities of your choice over several years.

Because you don't sell the assets before you donate, you pay no capital gains tax on any appreciation prior to the donation. And because the money in a donor-advised fund is legally no longer yours, it's not part of your taxable estate.

Another benefit: The donations you make through a donor-advised fund remain private.  "No one’s giving your name to other charities, so you'll avoid future solicitations," notes Lawrence Pon, a CPA and personal financial specialist in Redwood City, Calif.

While you no longer own the assets you've donated, you still have control over how they're invested and where your donations will go.  While the assets remain in the donor-advised fund, they have the potential to grow, tax-free. (Cash donations are limited to 50 percent of your adjusted gross income; donations of long-term appreciated assets are limited to 30 percent of your aggregated gross income.)

To set up a donor-advised fund you can turn to investment companies such as Fidelity, Schwab, and Vanguard. Each firm may require different minimum donations to set up such an account. There are also administrative fees, so it’s a good idea to compare them first.  If you purchase mutual funds within these accounts, keep in mind that they also have their own expense ratios.

Another idea is to go through a community foundation. These are local nonprofit organizations that raise funds to help other nonprofits. Unlike with commercial donor-advised funds, the staff of community foundations can give you advice on how and where to direct your charitable giving, including setting up scholarship funds and getting involved in donor circles. They also can help vet charities for you.