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Making Your Money Last

Charitable Giving in Rocky Times

If you're short on cash, give charities stock, household items and your time.

EDITOR'S NOTE: This article was originally published in the July 2009 issue of Kiplinger's Retirement Report. To subscribe, click here.

As you tighten your spending, you may be tempted to cut back on your charitable giving. But philanthropic groups, stung by poor returns on their own investments and decreased donations, say they need your help more than ever. "This is a time for people to be heroes for charities," says Mary Milgrom, executive vice-president of the National Multiple Sclerosis Society.

Don't have extra cash to donate? Consider these giving strategies.

Hand over stocks. If you've held stock for a decade or two, it's probably grown in value over time. Say you bought 100 shares of a stock at $10 a share and it's now worth $30. If you give the stock to charity, rather than selling it, you won't have to pay the 15% in capital-gains tax on the $2,000 in profit. And itemizers will be able to deduct the $3,000 current value as a charitable contribution.

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Transferring a long-held asset is also an option if you have a donor-advised fund. You can get the immediate tax deduction, and you can dole out the money to charities at any time. "Avoid the capital-gains tax, receive a deduction, make grants immediately, and let some money stay in the fund to grow over the long term tax-free," says Ben Pierce, executive director of the Vanguard Charitable Endowment Program. Moreover, you can donate life insurance policies and hedge fund partnership interests.

You can also reap a benefit from selling depreciated stock and giving the cash to charity. Say you bought a stock for $15,000 and it's now worth $10,000. If you gift the $10,000, you can take a deduction for that amount. But if instead you sell the stock and give the $10,000 to a charity, you get the $10,000 write-off -- and a $5,000 capital loss that you can use to offset any gains, says Gordon Bernhardt, president of Bernhardt Wealth Management, in McLean, Va.

Donate your stuff. Scour your home for items you no longer need. Before calling the Salvation Army, perhaps call a soup kitchen to see if it could use your old plates. "Whether it's a car or a couch or books, contact the charity to see if it has a need for your item," says Bennett Weiner, chief operating officer of the Better Business Bureau's Wise Giving Alliance.

If you plan to buy a new car, consider donating your old vehicle. The charity will most likely sell the car. In that case, you can only take a deduction based on the car's sale price, which is usually lower than fair market value. Perhaps you can find a group that will use your car. "If the charity uses the car for services, you can deduct the fair market value," says Weiner.

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Offer your time. "If you can't write as large of a check this year, you can volunteer your time and expertise to assist a charity," says Sandra Miniutti, vice-president of marketing for Charity Navigator (www.charitynavigator.org), which evaluates more than 5,000 charities.

Many groups can make use of your work experience. For instance, 250 retired or laid-off executives donate their time to the National Executive Service Corps (www.nesc.org). They volunteer as consultants for nonprofit organizations in a variety of fields, including board development, marketing and finance, says president Betsy Weber.

Stretch your dollars. Target your diminished resources only on charities that are most likely to put your money to good use. Don't spread your money around. "If you find a few great charities doing great work, you get more bang for your buck," says Miniutti.

Peruse a charity's annual report. Make sure the group spends at least 65% of its budget on programs and services rather than on administration and fund-raising. You can check out charities at Charity Navigator and the BBB Wise Giving Alliance (www.give.org).

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Ed Gormley, 81, of Harrington Park, N.J., began to study the spending habits of his favorite charities after his retirement assets slid by 35%. He stopped contributing to groups that spend more than one-fourth of donations on administrative costs. "There are charities I donated to at one time that I have not sent a donation to," he says. With others, he has cut donations in half. He gives to 14 charities, down from 20.

Also, consider giving to a charity in someone's name as a birthday or holiday gift. For instance, rather than giving your daughter yet another sweater, donate money in her name to educate a girl for a year through Save the Children.

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