Tax-Advantaged Giving

Income tax laws encourage contributions to public charities like United Way by providing—within the tax code—income tax deductions for donors who itemize their federal tax returns.

Donors can make gifts at reduced costs. For example, if you make a cash contribution of $10,000 to United Way, you may claim a deduction of $10,000 on your income tax return. In this scenario, if you are in the 37% marginal income tax bracket, you will reduce your overall federal tax liability by $3,700.* In effect, you can

give United Way $10,000 at a cost to you of $6,300.

GIFTS OF APPRECIATED STOCK

If your gift was in appreciated stock as shown in the chart, with a cost basis of $3,000 (therefore a gain of $7,000), the cost to you would still be $6,300, which is more advantageous to you than selling the stock directly and paying the capital gains tax.

COMPARISON OF TAX SAVINGS FROM THREE GIFTS OF $10,000

Assumes a $3,000 cost basis on gifted stock (therefore a gain of $7,000)

GIFT AMOUNT

Federal Income Tax Savings (37%) Federal Capital Gains Tax Paid (20%) Net Savings

CASH DONATION

PERSONAL SALE OF STOCK GIFT OF STOCK TO UNITED WAY

$10,000 $10,000 $10,000

$3,700 $3,700 $3,700

$0 $3,700 ($1,400) $2,300

$0 $3,700

DONOR GIFT COST $6,300 $7,700 $6,300

*There may be additional savings in avoiding Maryland state income tax. Charitable gifts are subject to the deduction limits set by the Internal Revenue Code. Any excess deductions can be carried over an additional five years. Additionally, charitable deductions are subject to the phaseout of itemized deductions for certain high-income taxpayers. This material is intended to be illustrative only; we encourage individuals to review their plans with their own tax counsel to ensure that their particular circumstances are fully considered when calculating the tax consequences of any charitable gift.

RETIREMENT ACCOUNT TAX-ADVANTAGED GIVING

Donors might consider contributing to United Way via a qualified charitable distribution (QCD). This move allows IRA owners age 70 ½ or older to directly transfer up to $100,000 to charity each year. The QCD can count as some or all of the owner’s Required Minimum Distribution; the QCD amount won’t be included in adjusted gross income. You can make a QCD at 70 ½ even if you don’t begin taking Required Minimum Distributions until age 72. Whether from a 401(k), 403(b) or an IRA, the distribution is taxfree and must be paid directly to United Way from the account and cannot be first distributed to you. You should consult with your accountant or tax advisor for further direction on a QCD.