Before you begin giving, ask yourself a few key questions:

• What's important to me?
• Where is there a real need?
• How can I have a lasting impact?

You answers will help to define a meaningful strategy for your charitable tax donations.

Choosing a charity for charitable tax donations

There are thousands of charitable organizations to support. No matter which you choose, you'll need to make sure that you're dealing with an eligible charity to satisfy IRS rules for charitable tax deductions. The IRS provides a list of eligible charities in Publication 78, available at IRS.gov. You can start by contacting your local charity registration office, which is typically a division of your state attorney general's office. Your local Better Business Bureau (BBB) can also provide information on charities.

Once you've got a list of registered organizations, contact each one or check their website to see a copy of their annual report. This report explains the charity's mission, lists its key personnel and provides a breakdown of how donations are spent.

The BBB Wise Giving Alliance also provides independent evaluations of popular charities. These reports are available online at give.org. You can also request written reports by writing to BBB Wise Giving Alliance, 4200 Wilson Boulevard, Suite 800, Arlington, VA 22203.

Understanding rules for giving

You're free to give as much to charity as you like. However, to claim a tax deduction you'll need to follow IRS rules and keep records of your gifts. The tax deduction is generally available up to 50% of your adjusted gross income. Monetary contributions are the easiest to report.

Deductions are not allowed for monetary gifts unless accompanied by a bank record or a written receipt from the charity indicating the amount of the contribution, the date of the donation and the name of the charity.

If your contribution is $250 or more, either in cash, property or volunteer-related expenses, you will also need to obtain a written description of your gift. This description must contain an acknowledgement from the charity of your contribution, the cash amount or a description of non-cash items donated, a statement of whether the charity provided goods or services in exchange for the donation and — if goods or services were provided — a good-faith estimate of their value. If the charity gives you goods or services of more than nominal value, a receipt is required for gifts of more than $75.

Qualified Charitable Distributions from an IRA

For 2006-2009, IRA owners who are 70 1/2 or older may make a qualified charitable distribution (QCD) from their IRA of up to $100,000 that will not be included in their income. If you have an IRA that contains after-tax money, the pre-tax contributions and earnings will be distributed first for a QCD. This is contrary to the normal rule that IRA assets are distributed proportionately.

Non-cash gifts

To declare charitable gifts of certain non-cash items worth more than $500 (such as used clothing or furniture), you must also supply cost and acquisition information for the items given. When claiming single non-cash gifts worth more than $5,000 (excluding publicly traded stock), you must also include an appraisal of the gift's value with your tax return.

Donating used items or volunteering
Used items such as computers and clothing are subject to depreciation over time, so you won't be able to declare your purchase price as a deduction. Clothing and household items must also be in "good used condition" or better for a deduction. Time spent volunteering typically isn't deductible either, but expenses associated with volunteering, such as transportation and materials, are, with required records.

Donating assets that have appreciated over time
One option that enables you to avoid capital gains taxes is donating assets that have appreciated in value. Outside of a charitable trust or foundation, this is one of the most effective ways to reduce taxes through charitable contributions. You can donate appreciated stock as long as you have owned it for more than one year. You can deduct the full fair market value of the gift from your taxes, and any appreciation will escape taxation. If instead, you donate other long-term assets, such as artwork, antiques, collectibles, or most other non-cash items, the deduction may be limited if the asset is put to an unrelated use by the charity.

Charitable trusts and foundations
In addition to direct gifts to charity, other options include a charitable remainder trust, charitable lead trusts or setting up a private foundation. However, complex rules govern the creation and maintenance of these vehicles. Tax and legal advisors are necessary to determine if a trust or foundation is appropriate for you.

Gifting to minors

Custodial savings accounts offer tax advantages and help you maintain investment flexibility. These are two types of custodial accounts that may be available, depending on state law:

• Uniform Gifts to Minors (UGMA)
• Uniform Transfers to Minors Accounts (UTMA)

UGMAs and UTMAs allow an adult to make an irrevocable gift to a minor.

• The account is set up by an adult to benefit a minor child.
• Control of the account passes to the child when he or she turns 18 or 21 (varies by state).
• Adults can take advantage of the annual gift tax exclusion of $13,000 and $26,000 for married couples who consent to split gifting in 2009 by making a contribution to this account.
• Investment earnings over $1,900 are generally taxed at the adult's income tax rate from the opening of the custodial account until the year the child turns 18 (19 for a child whose earned income does not exceed one-half their support, or 24 if they are also a full-time student).
• The accounts are considered the student's assets in financial aid calculations.

Charitable donations are an excellent way to reduce your taxes and make a difference in the lives of others. An Ameriprise financial advisor can help you determine the charitable causes that are right for you, and help you develop a strategy for making your contributions as tax-efficient as possible. Your financial advisor can also ensure that your giving doesn't interfere with your own retirement income needs.