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Choosing the Right Asset to Give to Charity at Year-EndPosted November 2020
When thinking about making a charitable gift at year-end, it is easy to think first of a gift of cash. Cash gifts certainly have a lot of positives—making a cash gift can be as easy as writing a check, and there is no question about substantiating the value of the gift.
Cash gifts are also subject to the most favorable limits on how much you can deduct in any given year, typically 60% of your adjusted gross income (AGI). Thanks to provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, taxpayers can elect to deduct cash gifts up to 100% of their AGI in 2020—and even those who do not itemize can take a deduction of up to $300 for cash gifts in calculating AGI this year.
Clearly, there is a lot to like about using cash to make charitable gifts. However, before reaching for your checkbook, it may be worth considering the benefits—both financial and otherwise—of using other assets to fund your charitable gifts.
Appreciated Property May Yield Multiple Savings
Many of our friends have found that giving appreciated assets—like stock—produces even better overall savings than gifts of cash. REASON: If you have owned the asset for more than one year, you are entitled to take a deduction for its full fair-market value and you avoid paying capital-gain tax on the appreciation.
EXAMPLE: Susan makes an annual gift to our organization of $10,000. This year, instead of cash, she decides to give $10,000 worth of stock she purchased three years ago for $5,000. In addition to claiming a $10,000 charitable deduction, she also does not have to pay capital-gain tax on the $5,000 appreciation in the value of the stock—which could save her up to $1,190 compared to selling the stock. Total savings could reach $4,890.
Gifts of long-term appreciated property are deductible up to 30% of AGI.
Additional Benefits: Financial and Non-Financial
Gifts of some kinds of noncash assets can produce benefits beyond any tax savings generated by the gift. Even though it may not lead to greater tax savings, choosing certain noncash assets can also be financially beneficial.
For instance, gifts of tangible property—like works of art or valuable collections—may work to relieve you of the burden of insurance and maintenance. Note: The available deduction for gifts of long-term appreciated property vary depending on the exact kind of property and whether or not we can use the property in a way related to the pursuit of our mission.
We Are Available to Help
What is the best asset to give at year-end? The answer depends on your specific circumstances. We would be delighted to meet with you and your advisors as you consider what might work best for you. Feel free to contact our office to arrange a meeting.
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