Maximize Giving Benefits
by Jessica High

Recently, America reached a milestone in giving. In 2007, $102.3 billion was given, a total never given before in all of our history. Giving tends to be seen as only for the charity’s benefit, but even this is no longer true. With careful planning, charities and donors can receive the maximum benefits from donations. For the donor, not only can they benefit the charity, but they can receive tax benefits too.

 

There are three types of tax benefits: estate tax break, avoidance of capital gains, and current income tax deduction. The estate tax break is “a charitable gift made during the donor’s lifetime removes assets and their future appreciation from the potential estate,” according to Houston Business Daily’s (HBD) article Giving It Away to Charity. Capital gains tax that would be imposed if assets were sold can be avoided by giving away appreciated securities. The fair market value of a charitable gift can qualify as a current income tax deduction, reducing the donor’s income taxes.

 

Volunteer time does not count as a tax deduction. However, the IRS does offer a few guidelines on things involved in volunteer work that count as a tax deduction:

 

·         Taxpayers may deduct the costs of traveling to locations where they work as an unpaid volunteer at a mileage rate approved by the IRS.

·         The cost of uniforms, books, or tools used in volunteer activities may be deducted if they are required of the work and used solely for the work.

 

·         Purchases at charity auctions are deductible to the extent that the price paid exceeds fair market value.

·         Taxpayers may deduct the fair market value of property contributed to charity such as used clothes given for a yard sale. If the amount claimed is more than $250 per contribution, a statement must be obtained from the charity documenting value.

 

Donor Advised Funds are another popular way to receive tax benefits. The fund gives the donor the options of deciding where they wish to donate to and receive a deduction for the contribution. However, all gifts given from a donor advised fund must be irrevocable.

 

“A Charitable Remainder Trust is an irrevocable trust that names one or more qualified charities as beneficiaries. It requires a trust document, typically drafted by an estate planning attorney, and is often funded with appreciated securities, real estate or other appreciated property. By transferring appreciated securities to the CRT, the donor avoids paying capital gains tax on a sale. Once securities, real estate or other appreciated property are in the trust, they may be sold by the trustee and the assets can be repositioned to increase income and diversification. Since the trust is a tax-exempt entity, no capital gains tax is due on the sale of trust assets. Because the transfer is irrevocable and the grantor gives up control of assets, they are removed from the grantor’s taxable estate,” says HBD’s article.

 

Lastly, a charitable gift annuity is another option for donors. It is easier to set up than a charitable remainder trust and offers similar advantages. “It makes a completed gift to the designated charity in the present and pays a lifetime income back to the donor,” according to HBD’s article.

 

With these options, donors can increase their tax savings, allowing them to continue to give more. The benefit is immense to both the charities and the donors. Though these may be difficult economic times, with careful planning and wise use of the available resources, it will be simple to carry on this movement of generosity.

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