CHARITABLE GIVING
Keep on giving to get substantial tax savings
In the current economy, you may be focused on holding on to what you have. But continuing to give to charity may still be a good move because
foundation. It offers you significant control over how your donations will be used.
of the substantial tax savings you’ll get. Plus many charities are in desper-
But you must comply with complex rules,
ate need of support. In determining your giving strategy, consider what to
run. Also, the AGI limits for deductibility of
which can make foundations expensive to contributions to nonoperating foundations
give, as well as how to give it.
are lower.
Keep it simple — donate cash
Make the most of stock gifts
Outright gifts of cash (which include gifts
Publicly traded stock and other securities
made via check, credit card and payroll
you’ve held more than one year are long-
deduction) are the easiest. The key is to
term capital gains property, which can
substantiate them. To be deductible, cash
make one of the best charitable gifts. Why?
donations must be:
Because you avoid paying tax on the gain
z Supported by a canceled check,
you’d incur if you sold the property.
If you’d like to influence how your donations are spent but avoid a foundation’s tight rules and high expenses, consider a donor-advised fund. Many larger public charities offer them. Warning: To deduct your donor-advised fund contribution, you must obtain a written acknowledgment from the sponsoring organization that it
credit card receipt or written
Donations of long-term capital gains prop-
has exclusive legal control over the assets
communication from the charity
erty are subject to tighter deduction limits
contributed.
if they’re under $250, or
(30% for gifts to public charities, 20% for
z Substantiated by the charity if they’re
gifts to nonoperating private foundations).
Enjoy income from a CRT
In limited circumstances it may be better
To benefit a charity while helping ensure
to deduct your tax basis (generally the
your own financial future, consider a chari-
Deductions for cash gifts to public charities
amount you paid for the stock) rather than
table remainder trust (CRT):
can’t exceed 50% of your AGI. The AGI limit
the fair market value, because it allows
is 30% for cash gifts to nonoperating pri-
you to take advantage of the higher AGI
vate foundations. Contributions in excess
limits that apply to donations of cash and
of the AGI limit can be carried forward for
ordinary income property (such as stock
up to five years.
held one year or less).
AMT ALERT: Charitable contribution
Don’t donate stock that’s worth less than
deductions are allowed in figuring your
income tax deduction for the present
your basis, though. Instead, sell the stock
AMT liability. But your tax savings may
value of the amount that will go to charity.
so you can deduct the loss and then
be less if you’re subject to the AMT than
donate the cash proceeds to charity.
$250 or more.
they would be if you weren’t. That is, if
z For a given term, the trust pays income to you (some of which will be taxable). z At the term’s end, the trust’s remaining assets pass to one or more charities. z When you fund the trust, you receive an
z The property is removed from your estate. A CRT also can help diversify your portfolio
you’re in the 35% tax bracket for regular
Make gifts over time
tax purposes, but the 28% tax bracket
If you don’t know which charities you want
that would generate a large capital gain
for AMT purposes, your deduction may
to benefit but you’d like to start making
if sold. Because a CRT is tax-exempt, it
be worth only 28% instead of 35%.
large contributions now, consider a private
can sell the property without paying tax on
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CHARITABLE GIVING
if you own non-income-producing assets