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During Lifetime Gifts

You can donate cash, appreciated assets and some types of personal property and receive income tax deductions if the donations are made to a qualified charity. The tax benefits associated with these different types of donations are discussed below:

Cash & matching donations at work.
Appreciated Assets
Gifting stocks
Gifting closely held stock
Gifting real estate
Other types of personal property
In the following sections we include examples of gifts and their potential tax savings. Please note that these examples are not meant to be authoritative or to provide tax, legal or financial advice. We advise potential donors to seek their own professional advisors to determine the legal, tax and financial ramifications of gifting.

Cash contributions

With cash donations you can receive an income tax deduction for the amount you contribute. For cash gifts over $250 you must receive a receipt from the charitable organization in order to receive the deduction. The IRS no longer accepts a cancelled check as valid proof of a donation of more than $250.

Make a donation. Learn on how to make matching donations at work.

The only limitation on tax deductions for donations of cash is that you cannot deduct more than 50% of your adjusted gross income in one year. However, if you make a gift that is larger than 50% of your adjusted gross income you can carry over the remaining amount and apply it for up to 5 additional years if this is necessary.

Appreciated Assets

If you would like to make a gift and you have stocks or real estate that have gone up significantly in value you will want to consider donating these assets instead of cash.

1. Gifting Stocks

Stocks or mutual funds you have owned for some time which have gone up substantially in price can be ideal as gifts, as they can provide you with numerous tax advantages. By donating these assets you can take a deduction for their full fair market value. Plus, you avoid the capital gains taxes that would have been due had you sold the stocks or funds yourself. These taxes can be up to 28% of the gains, depending on your income.

Let's look at an example to see how this strategy works:

Let's say you have a stock that was purchased several years ago for $8,000 and is now worth $20,000. Let's also assume that you and your spouse's combined marginal tax rate is 36%. If you donate this stock to a charity instead of selling it yourself, you would receive an income tax deduction for $20,000 and avoid paying capital gains taxes on the $12,000 in gains. Combined, you would save over $9,000 in taxes, which is more than the original cost of the stock. Plus, you were able to make a $20,000 contribution to a valuable charitable cause.
This method works even if you want to keep the stocks or funds you own. In this case you would donate the stocks or funds to receive the deductions and then repurchase them in your account. By doing so you would avoid the capital gains taxes, get a new cost basis for your holdings, and make a charitable contribution.

If you would like to donate stocks or mutual funds that have gone down in value you may first want to sell them to take advantage of the loss on your income tax return. You could then donate the proceeds of the sale to a charity and receive a deduction for the full amount of the cash donated.

For large stock holdings that have substantial capital gains you may want to consider creating a charitable remainder trust, a vehicle that can give you a lifetime income, tax advantages, and help you make an important contribution to charity.

2. Gifting Closely Held Stocks

If you are one of the founders of a successful private corporation you probably own stock in the company that has appreciated significantly in price and yet has a cost basis near zero. If this describes your situation and you would like to donate to a charity, some of this stock can be the perfect vehicle for your contribution. This strategy requires expert tax advice. The net result, however, can be a great benefit to the donor and the recipient organization.

3. Gifting Real Estate

While the same basic principles apply when donating stock or real estate to a charity, there is one important difference. Unlike stock investments, when considering gifting real estate there are certain exclusions on capital gains taxes that can be taken. If you have lived in a house as your primary residence for at least 2 of the previous 5 years, up to $250,000 of the capital gains are excluded ($500,000 for a married couple).

a. Primary Residence

For many people their home is their largest asset, and many people who are dedicated to charitable causes would like to donate some or all of the value of their home. It is possible to donate your home now and receive a charitable deduction even while you continue to live in the home during your lifetime and the lifetime of your spouse or a child. For details on this strategy see the information on a retained life estate. Another strategy commonly used when dealing with any real estate that has appreciated is a charitable remainder trust. This vehicle can give you a lifetime income, tax advantages, and help you make an important contribution to charity.

b. Secondary Residence and Other

The exclusions on capital gains taxes mention above do not apply to vacation homes, rentals, vacant land or any other real estate holdings that aren't your primary residence. As a result, these other types of property can be ideal as donations. When you gift these types of properties to a charity, you pay no taxes on the appreciated value, but instead you receive a tax deduction

4. Gifting Other Types of Personal Property

You may have other assets you would like to donate, such as a car, boat, jewelry, etc. Please contact us directly to discuss these kinds of donations.

Please note: The information on this site is not intended as legal, tax or investment advice. For such advice, please consult a professional advisor of your choice.

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