Cutter Family Finances: Making Charitable Donations During the Holidays


I love Thanksgiving. I love everything about it. For me, Thanksgiving is a time to slow down, spend time with family, read (for pleasure) and reflect on things that are important to me.

Last weekend I read some essays from John Bunyan, who was a 17th-century philosopher, writer and Christian preacher. (My kids think I'm nuts for reading anything but fiction. They want me to read "The Hunger Games," but I tell them that book sounds ridiculous since you should never play games on an empty stomach. The three of them just roll their eyes at me.) John Bunyan wrote, "A man there was and they called him mad; the more he gave, the more he had." Hmmmm . . . it got me thinking.

We've all heard the phrase "it's better to give than receive," right? Well it seems many people share that philosophy. Americans gave nearly $230 billion last year to charities. While donations are down from the pre-2008 market crash levels by about 8 percent, 2012 donations still rose about 3.5 percent from 2011. In my opinion, this is astonishing since the average American household income has dropped over the past five years.

This is the time of year that most people think about making a charitable contribution. And I have found that while most people have the best intentions of giving to charity, many find they don't know where to start. So what should be the first step?

The first step is to choose a cause and a charity that you want to support. Don't limit yourself to "trendy" charities; think about the issues that are important to you. There are so many opportunities to give to different people and causes, including, to our veterans, the impoverished, religious institutions, educational causes, environmental causes, and never forget our elderly and our youth. I find that I get more satisfaction and give more consistently when I donate to a cause that means a lot to me.

The next step is to make sure you are donating to a legitimate charity. Here you must do your research. Make sure to ask the charity for written information before you make a donation. A legitimate charity will have documentation outlining its mission, explaining how your donation will be allocated to expenses and then distributed, and providing evidence of its tax-exempt status. Also, there are some great online resources to help with your research. The IRS has a searchable database of charities that have received tax-exempt status, and several websites, such as the Better Business Bureau and the Federal Trade Commission, can verify the legitimacy of a charity.

As Cutter Family Finance readers know, a solid financial strategy includes advanced tax planning. For many, charitable giving can provide tax deductions. But there are a few things to keep in mind when it comes to claiming a donation.

You must request a receipt from the charitable organization that includes the name of the organization, the date of your donation, and the amount. Additionally, do not send cash; instead you should pay by either a check or credit card. Doing so will generate a written record of your donation in addition to your requested receipt, in case Uncle Sam comes knocking. Also remember that for a donation to be reflected on your 2013 taxes, it needs to be made by the end of this year.

To claim a deduction, you must also file Schedule A for itemized deductions with your Federal Income Tax Form 1040. However, if you do not file a Schedule A, and instead take the standard deduction, it may still be possible to derive a tax benefit from your charitable donation if you receive a Required Minimum Distribution from an IRA. By making a Qualified Charitable Distribution (QCD), an individual is permitted to use part or all of the RMD from an IRA to make a gift to a charity of his or her choice. If certain guidelines are followed, part or all of the RMD that is given to charity is free from income tax. (This provision is set to expire at the end of this year unless Congress extends it.)

It is important to note there are additional requirements for larger donations, as well as limits on the amount of an RMD that can be used for QCDs. Also, there are maximum contribution limits based on income, so make sure to consult your financial advisor who specializes in advance tax strategies or your CPA before making a QCD.


Even if you are strapped for cash, there are ways to give and help—consider donating stock or property. The IRS allows you to deduct the fair market value of any such donated stock or property. You can also donate used clothes and household items, but they must be in good condition or better to be deductible (not to mention appropriate for giving to those in need). And remember, you can always give your time. Even though you can't deduct the hours, your time is invaluable.

Lastly, as I read John Bunyan's quote to my kids, I realized that another benefit of making charitable donations is the impact it has on our children. Jill and I have started talking to our girls about charity, why we donate and how it helps others. I told them again as I have told them before that it is not what we get out of life from others that is important, but what we give of ourselves.

My oldest daughter, Maeve, came downstairs that evening for supper and gave me the $20 that she had been saving for a new iPhone case. She said, "Dad, those people who lost everything in the Philippines need this more, don't you think?" Well, I do think it is better to give than to receive.

As you're putting together your holiday gift list, don't forget donations to charity.

Be vigilant and stay alert, because you deserve more.

Jeffrey Cutter, CPA, PFS is the managing partner from Cutter Financial Group, LLC (, which provides private wealth and investment management. He can be reached at

Investment advice is offered by Horter Investment Management, LLC, a registered investment adviser. Insurance and annuity products are sold separately through Cutter Financial. Securities transactions for Horter Investment Management clients are placed through Pershing Advisor Solutions, Trust Company of America, Jefferson National Monument Advisor, Fidelity,  Security Benefit Life and FC Stone.  1.


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