Tax Benefits of Giving
How Much of Your Contribution is Deductible and When
The government encourages charitable giving by making gifts tax-deductible. Donors should be aware of two considerations that apply to charitable deductions: first, how much of the value of their gift will be deductible; and, second, how much of that deduction will they be able to claim in a tax year? The answers depend on what asset was given and for what purposes; on how many other gifts the donor made during the year, and on how much taxable income the donor will claim for the year.
You may deduct gifts of cash up to 50 percent of your adjusted gross income (AGI) in any given year.
Provided you have owned it for more than one year, you may deduct the fair market value of appreciated property such as securities, tangible personal property related to the mission of the charity and real property up to 30 percent of your adjusted gross income in any given year. If you have owned the property for less than one year, or if you gave tangible personal property not related to the mission of the charity, then you may deduct only your cost basis in the property, but you may do so up to the 50 percent limitation.
Add Up Your Gifts
The contribution limits apply to the aggregate of all the charitable gifts the taxpayer has made during the tax year. Cash gifts count first against the AGI, then gifts of property.
Deductions in excess of the percentage limitations are not lost. If you are unable to deduct all of your charitable gifts in the year you made them, you may carry forward any excess deductions for up to five subsequent years.
Gifts that return income to the donor, such as gift annuities, pooled income fund transfers, and charitable remainder trusts, provide a charitable deduction for the present value of the charity’s interest in receiving the gift after payments have been made to the beneficiaries for their life expectancy. Your charity will be able to calculate the charitable deduction for you. Charitable deductions will vary from gift to gift depending on the ages of the beneficiaries, the rate of income being paid to the donors, and the type of gift vehicle used.
Substantiating Your Contribution
You substantiate your gift of cash by retaining a copy of your canceled check and the gift receipt provided by the charity. The publicly reported selling prices of marketable securities, plus your gift receipt provided by the charity, will substantiate the value of securities gifts. In order to substantiate the value of an outright or deferred gift of real property or tangible personal property in excess of $5,000, you must obtain an appraisal in a form acceptable to the Internal Revenue Service and file a summary of the appraised with your tax return (the summary is IRS form 8283).
Alternative Minimum Taxpayers
If you are an alternative minimum taxpayer, your deduction for a gift of appreciated property may be limited to your cost basis in that property by operation of the alternative minimum tax. All explanations and examples provided in this web site assume that you are not, nor will your gift make you, subject to the alternative minimum tax.
The information contained on this page should not be construed as legal advice. Tax laws and IRS requirements are subject to change. Please consult your legal or tax advisor/planner for specific advice on your situation.
- May 11, 2018
Probate with Hon. Kathleen A. Forsyth