When asked to make a gift to support the causes near to our hearts, most of us wouldn’t hesitate to reach for our wallets. When it comes to making a larger gift, however, thinking beyond cash can help us make an even greater impact on the communities and causes we care about… not to mention provide tax benefits.
Here are ten assets for outright charitable giving (that don’t involve writing a check):
1. IRA CHARITABLE ROLLOVER If you are over the age of 70 1/2, you may make a qualified charitable distribution up to $100,000 from an IRA to a charity without paying taxes on the distribution. The gift may also qualify as your required minimum distribution. This is like receiving a 100% tax deduction.
2. APPRECIATED STOCKS OR MUTUAL FUNDS Making gifts of stocks or mutual funds that have increased in value since purchase has several benefits. First, if you have owned the property for more than one year, it can be deducted at its current market value. Second, the sale of appreciated stocks or mutual funds generates a capital gain upon which you are taxed. However, when you make a charitable gift of the stocks or mutual funds you pay no capital gains tax.
3. GRAIN A delivery of grain to the elevator in the name of a charity allows for the avoidance of claiming the sale price as income. This is like making a tax-free gift. In addition, the cost of production may still be deducted as a business expense.
4. LIVESTOCK Similar to a gift of grain, a gift of livestock allows a farmer to avoid claiming the sale price of the commodity as income and deduct the cost of production as a business expense. In other words, the gift can be made completely tax-free.
5. REAL ESTATE A gift of real estate that has increased in value since you have owned it has several benefits. First, if you have owned the property for more than one year, the gift of real estate can be deducted at its current market value. Second, the sale of the appreciated real estate generates a capital gain upon which you are taxed. However, when you make a charitable gift of the real estate, you pay no capital gains tax when it is sold by the charity.
6. CLOSELY HELD STOCK Transferring business ownership, either at retirement or as an inheritance, offers unique opportunities and benefits of charitable giving. Not only does transferring your stock bypass capital gains and provide a charitable deduction, but it also allows the corporation to buy back the stock.
7. ANNUITY The current value of the annuity is fully tax deductible when gifted to charity. The growth in the value of the annuity will be taxed as ordinary income and may be offset by the charitable income tax deduction.
8. COLLECTIBLES (AND OTHER TANGIBLE PROPERTY) Transferring ownership of a collection prior to the sale to a charity allows for the avoidance of paying capital gains tax on the growth in the value of the collection since it was acquired. The tax deduction is usually limited to the price originally paid for the collection.
9. U.S. SAVINGS BONDS The current value of the bonds is fully tax deductible when gifted to charity. The growth in the value of the bonds will be taxed as ordinary income and may be offset by the charitable income tax deduction. Turn an idle asset into an income producer with a contribution to a charitable gift annuity.
10. PAID-UP LIFE INSURANCE POLICY By naming charity the owner and beneficiary of a paid-up life insurance policy, you will be able to receive a current income tax deduction. The income tax deduction is approximately equal to the policy’s cash value or the premiums paid, if less. Or, name a favorite charitable organization or community foundation as the beneficiary of the policy.
For more information on this topic, watch this brief interview with Director of Advancement and Gift Planning, Jim Gustafson.