The simplest and fastest way to make a charitable gift is to give cash, usually by personal check. Outright gifts of cash are fully deductible in the year of the gift (for those that itemize) to the extent of 50% of adjusted gross income. Unused portions may be carried over for up to 5 additional years.
There is an added advantage when donating stocks and bonds that have appreciated in value and have been owned for more than one year. Generally, when an owner sells securities, there is a capital gain tax due on the amount that the securities have increased in value over the original purchase price. The amount of the tax is based on the donor’s federal income tax bracket. By donating appreciated securities to charity and allowing the charity to sell them, the capital gain tax is avoided. Gifts of appreciated securities are fully deductible in the year of the gift to the extent of 30% of adjusted gross income. For securities that have lost value, the donor should sell the asset and then donate the net proceeds, because the donor can then claim a capital loss.
There is an added advantage when donating real estate that has appreciated in value and has been owned for more than one year. Generally, when an owner sells real estate, there is a capital gain tax due on the amount that the property has increased in value over the original purchase price. The amount of the tax is based on the donor’s federal income tax bracket. By donating long-term appreciated real estate to charity and allowing the charity to sell it, the capital gain tax is avoided. Gifts of real estate are fully deductible in the year of the gift to the extent of 30% of adjusted gross income.
With real estate, it is possible to give a fractional interest in property by deeding an undivided interest. When undivided interests are donated and the property is jointly sold, the sale proceeds are split between the donor and the charity. The donor is responsible for any capital gains taxes due on the retained portion. For gifts over $5,000 in value, a professional appraisal is required to substantiate the value. Because of concerns for possible environmental contamination, such gifts must be closely examined before being accepted as a charitable gift. In some cases, a professional environmental audit will be required.
Tangible personal property is commonly thought of as an asset that can be touched and moved. Examples of tangible personal property include artwork, jewelry, collections, automobiles, furniture, rare coins and stamps, boats, books, antiques, etc.
Gifts of tangible personal property are subject to certain Internal Revenue Service rules regarding the charitable deduction. Specifically, the IRS has ruled that donated tangible personal property must be put to a use “related” to the purpose or mission of the charitable organization in order to receive a full fair market value charitable deduction. Otherwise, the charitable deduction is limited to the cost basis of the asset. If a donor claims a charitable deduction of more than $5,000 for the contribution of tangible personal property, then the donor is required to have a qualified appraisal.
Permanent Charitable Support Gifts
Life Income Gifts for Individuals
Income to Charity Later
Family Charitable Lead Trusts
At Death Gifts