 Helpful Articles
from David Vollrath,
Union County Foundation Executive Director
The Foundation encourages you to work closely with your professional advisor(s)
as you develop your estate plan and consider your present and future charitable goals. |
Rules for Charitable Giving
(Part of a series of articles on charitable giving and the Union County Foundation
by David Vollrath - Exec. Dir.)
Americans are among the most charitable minded people in the world. Every year literally billions of dollars are
donated to charitable causes. Not surprisingly our federal government provides significant tax incentives to encourage
charitable giving. Most people are familiar with donating cash, clothing, furniture, or food to charity but many
of us are less familiar with other types of donations. Understanding the rules can help you avoid unfavorable tax
consequences and help you best achieve your charitable goals. This article will discuss some of the basic tax provisions
that apply to charitable giving.
Generally federal law allows you to deduct the value of charitable contributions made during your lifetime. This
is accomplished by itemizing your charitable deductions. When you "itemize", it can generally be stated
that your cost of giving equals the value of the asset donated minus the tax savings received. Therefore donating
to charity costs the donor somewhat less than the value of the asset donated.
As you might expect there are certain limitations regarding charitable gift deductions. The deductible amount allowed
can depend on the type of charity, the type of asset donated, and even the way the charity uses the gift. For example
if personal property donated to a charity is used by the charity in a way that is unrelated to its charitable purpose
the allowable deduction is reduced. For a charity to be a "qualified charitable organization" it must
be designated as such by the IRS. Just because an organization says it is a "charitable" entity doesn’t
necessarily make it one in the eyes of the federal government. One easily accessed resource for verifying charitable
status is the IRS website Error! Bookmark not defined.. or you can ask the charity in question to verify its tax-exempt
status.
As a general rule gifts of cash have a higher annual deduction limitation than gifts of appreciated property. In
other words you can annually deduct a larger amount of cash gifted to charity than you can deduct long term appreciated
property. Charitable contributions of cash and short-term appreciated property to public charities (churches, schools,
and other organizations that receive their primary support from the public or government) are annually deductible
up to 50% of the donor’s AGI (adjusted gross income). Annual deductibility of long term appreciated property to
public charities is limited to 30% of AGI, and annual deductibility of long term appreciated property to private
foundations is capped at 20% of AGI. It is important to remember that in all cases the portion of the deduction
that can’t be deducted in a given year due to the limitations can be carried forward for up to five years. In other
words the donor has up to six tax years to use up the deduction within the annual deduction limitation parameters.
The above discussion deals with charitable gifts given during ones lifetime. It should be noted that charitable
gifts given at death are not subject to a deductibility limitation as long as the gifts do not exceed the gross
value of the estate. This essentially means that every dollar contributed directly to charity through ones estate
avoids estate tax.
Understanding these various deductibility issues can influence how one structures their charitable giving. We recommended
a donor should always work closely with their professional advisor(s) on such issues.
The Union County Foundation encourages you to consider your present and future charitable goals. The Foundation
is equipped to help you achieve these goals by providing: planned giving and estate planning resource information,
charitable gift annuities/life income plans, and a broad array of charitable choices. Please call us at 937-642-9618,
email us, reference our website, or stop by our Marysville office at 126 N. Main St. We are committed to helping
you.... “preserve your footprint in time.” |
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