When deciding what to contribute to a charity, consider a direct gift of property or other tangible assets, like stocks. With real estate, a direct gift is the simplest method of donating. The deed or title is transferred from the donor to the charity. As the donor, you generally receive a tax deduction equal to the fair market value of the property and that deduction may be carried forward for five years. You also avoid paying the capital gains tax that would otherwise accrue as a result of the sale of the property.
Other appreciated non-cash assets held more than a year can help you achieve maximum philanthropic impact and also help you reduce your taxes. Did you know that you can potentially eliminate the capital gains tax that would occur if you sold the assets yourself and simply donated the proceeds? You may also claim a fair market value charitable deduction for the tax year in which the gift is made, and can also choose to pass on that savings in the form of more giving. Talk with your tax preparer for details, but here is one example:
Perhaps you own a stock, BigXYZCompany, which currently has a fair market value of $5,000, ten times the $500 you paid to purchase it fifteen years ago. The $4,500 represents your capital gains, but if you donate the stock directly to a charity, there's no capital gains tax to pay, and you are still eligible to deduct the full fair-market value of the asset you donated from your income taxes as a charitable deduction, up to the overall amount allowed by the IRS. Some people may not be interested in donating stock because they think it will require a lot of paperwork and phone calls, or that their chosen charity may not be able to easily accept a stock donation--our TD Ameritrade account can accept the donation easily.
Other possibilities to discuss with your financial advisor include Charitable Remainder Unitrusts (CRUT). CRUTs are estate planning tools that provide income to a named beneficiary during the grantor's life and then the remainder of the trust to a charitable cause. The donor or members of the donor's family are usually the initial beneficiaries. The trust provides variable income to the beneficiary, which is based on a percentage of the fair market value of the assets (revalued each year) in the trust and usually funded with a valuable asset. These assets could include artwork, a house, stocks, bonds, or other property, and additional assets can be added and included in the trust as years pass. The federal government requires that the remaining charity receive at least 10% of the asset's value after the death of the grantor.
If you or your financial advisor whishes to discuss asset donations to Conservation Works, please call us at 707-978-4149.