It’s When Charity Begins, Not Where

Question: Under the new tax law passed by Congress, will it be better to make a generous donation to a charitable or nonprofit institution before the end of the year or after Jan. 1?

Answer: My tax experts in this area are CPAs at the Cornick, Garber & Sandler accounting firm and Douglas Givens, vice president for development, Kenyon College.

First, a lot depends on whether you will be itemizing your tax deductions or taking the standard, lump-sum deduction.

If you are not itemizing, the experts say you will get more tax benefits by making your donations before the end of the year. Next year, under the new law, people who don’t itemize will not be able to get deductions.

If you are planning to itemize and have pledged money to some institution (to be paid out over the next few years), it might be a good idea to donate enough appreciated securities or other property this year to cover your pledge.

This way, you can take advantage of the fact that your donation this year will bring a bigger deduction than it will after Jan. 1. The reason: The top tax rate will drop from 50% to 28%. This year Uncle Sam will, in effect, rebate 50 cents of every donated dollar. Later, the rebate will only be 28 cents on the dollar.

If you are not covering a multiyear pledge, then it becomes complicated. A lot depends on your tax bracket and the kind of income you have been receiving.

If you have been getting income from tax shelters and tax-exempt bonds, it might be better to make your donation next year because of a complicated alternative minimum tax system.

If you have fairly straightforward income from wages and savings or dividends, it might be better to make the donation this year.

The only way you can sort it out is to see a tax accountant and compare two sample returns--one with the donation this year, the other with the donation next year.

Q: I lost my job because of a reduction in the work force, and I am suffering from headaches because of the worry about who was going to be fired. Is it best to apply for unemployment compensation or worker’s compensation?

A: In most states, worker’s compensation will pay more benefits (for being injured or made ill). A doctor must back up your claim for worker’s compensation.

Q: I have a wife and two children and would like to know what kind of life insurance is best for us. What, for example, is variable universal life insurance or single premium universal life insurance?

A: In general, for pure protection of a family breadwinner’s earning power, term life insurance is the least expensive and the best buy. Shop around. Insurance companies are very competitive these days.

But, under special circumstances, more exotic types of life insurance may be better buys. Single premium universal life insurance involves a major, lump-sum premium payment. The money is invested and as its cash value increases, you can borrow money inexpensively and get some tax advantages.

Variable universal life insurance is similar to universal life, with a lot of payment and benefit flexibility, but it has the added attraction of allowing you to choose what kind of investment is used to build the cash value (stocks, bonds or mutual funds).