Holiday donations to charity can reward the giver - in real money

Shoppers trampling and knocking down one another in their mad rush to the store. Employees blithely using office computers to shop online during work hours. Techno-addicts racking up credit card debt in pursuit of the hottest - or is it the coolest? - ''must-have'' electronic gadgets.

None of this, of course, has anything to do with the spirit of the holiday season.

But this does: making a donation, whatever you can afford comfortably, to a charity of your choice.

The self-satisfaction of giving is its own reward, and reason enough for doing it. As a bonus, you can get a tax break that in some cases pays for a big part of your gift. Understanding the rules is important because tax savings are computed differently for different types of donations, explained Bob D. Scharin, senior analyst for RIA, a tax law information provider and part of The Thomson Corp.

Subject to limits based on income, charitable gifts made by Dec. 31 are deductible in your tax return for 2005 as long as you itemize deductions (but not if you take the standard deduction, although the law may change for 2006). If you use a credit card to make the donation in December, you can claim it for 2005 even if you don't pay the credit card bill until next year. If you give or mail a check in 2005, it counts for this year even if it is not cashed until 2006.

Now for some special considerations:

l Gifts of securities. Say you bought shares of stock years ago for $1,000 and they are now worth $5,000. Donating the shares directly is better than selling the stock and donating the sales proceeds.

If you donate the shares, you can still claim a $5,000 deduction based on their current market value. And you don't have to pay taxes on the $4,000 gain as you would if you sold the shares first. That's a savings of $600 at the maximum 15 percent rate for long-term capital gains. (The charity can sell the stock without paying any tax.)

But if the stock is now worth less than $1,000, you are better off selling it first and then donating the proceeds. That way you can claim a capital loss on your tax return.

l Car donations. Under a new law effective this year, if the car's fair market value is more than $500 and the charity sells it right away to raise cash, your donation is limited to the price the charity receives or $500, whichever amount is greater. (If the car's fair market value is $500 or less, your donation is the fair market value). But if the charity actually uses the vehicle, such as to deliver meals for the homebound, your deduction is the car's fair market value. Scharin's suggestion: Check among charities to determine their arrangements if any for selling donated vehicles.

l Artwork donations. Say you bought a painting for $100 years ago and now the artist has been ''discovered'' and the painting is worth $2,000.

If you donate it to a museum to display, your deduction is $2,000, its current value. But if you donate it for the museum to auction off to raise funds, your deduction is only $100, what you paid for it.

l Thrift shop donations. Your deduction is limited to what a buyer would pay for the item today (the price tag the thrift shop puts on it is a good indication). But you cannot deduct more than what you paid for the donated item. If you originally got it for free as a gift, no deduction is allowed.

l Gifts that give to you, too. If you want to make a considerable gift and still have something left over, one way is to buy a charitable annuity, Scharin said. (You donate a lump sum to charity. Some is used to pay you an income for life and the charity keeps the rest. Your deduction is the value of the charitable gift minus the value of the lifetime payments you receive, calculated using Internal Revenue Service life expectancy tables.) ''This can be a way to get a tax deduction and retirement income at the same time,'' Scharin said.

A charitable annuity can be funded with appreciated securities to also save on capital gains taxes. All the money saved on taxes can help fund a life insurance policy to replace, for your heirs, the money donated to charity. ''It's like giving away your money without giving away your money,'' said Chase Adams, a Fort Lauderdale, Fla. attorney and planned-giving consultant. I'll expand on this topic in a future column.

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Humberto Cruz can be reached at AskHumberto@aol. com or c/o Tribune Media Services, 435 N. Michigan Ave., Suite 1500, Chicago, Ill. 60611.