Tax Benefits of Charitable Giving

There are many ways to give to charity. You can make gifts during your lifetime or at your death. You can make gifts outright or through a trust. You can name a charity as a beneficiary in your will or designate a charity as a beneficiary of your retirement plan or life insurance policy. Or, if your gift is substantial, you can establish a private foundation or donor-advised fund.

In addition to the personal satisfaction of giving to your favorite charity, you may receive some tax benefits. Here are three ways to potentially receive tax benefits while making charitable gifts.

Tax Benefits of Charitable Giving

Income Tax Deduction

Deductible contributions may include money or property you give to churches or other religious organizations, federal, state and local governments, non-profit schools and hospitals, and other qualified organizations. Gifts can be made using cash or property and are deductible subject to certain limitations based on the type of property gifted and your adjusted gross income (AGI). If you are unable to deduct your contributions in the current year because they exceed your AGI limits, under current law you generally have five years to carry over and use this amount.

To claim an income tax deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records, or a written acknowledgment from the qualified organization showing the amount of the cash, a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift.

Avoid the Capital Gains Tax on Appreciated Securities

In general, a taxpayer is allowed a deduction equal to the fair market value of property donated to a qualified charity. If the donated property is “gain” property, and the property has been held by the donor for more than one year, the donor typically does not have to recognize the gain on the donated property.

You can benefit from getting a deduction for the fair market value of the property without paying tax on the gain or appreciation in the value of the security.

Reduce Your Estate Tax

Assets given away during your lifetime will likely not be included in the value of your estate at your death. Gifting appreciating assets can remove the future appreciation from your estate as well, helping you reduce your overall estate tax.

Conclusion

Charitable giving can be a valuable part of your overall tax and estate plan. Not only can you share your wealth with the charity of your choice, you may also receive some tax benefits.

 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Amy Libertoski
Amy Libertoski

CPA, PFS | Principal, Senior Financial Advisor

Amy Libertoski, CPA, PFS, is a Principal and Senior Financial Advisor with Wipfli Hewins Investment Advisors in Wausau, WI. Bringing 20 years of experience in the financial services industry, Amy specializes in financial, estate and retirement planning for families, as well as tax planning and preparation for high-net-worth investors.

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Tax Benefits of Charitable Giving

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