That is how much Americans gave to charity in 2019. There is little doubt that Americans are extremely generous. While much of that $449 billion came as cash donations, many generous Americans do not realize that there are non-cash gifts benefit both the donor and the recipient. The reality is that while cash gifts are easiest to donate, they are also limited to disposable income. It is easy to assume that if we don’t have the cash to give, we cannot give. But they are a whole range of assets that when donated, carry favorable tax benefits and increased charitable impact.
Here are four non-cash gifts that offer huge dividends.
Publicly Traded Appreciated Stock
Stock portfolios or mutual funds are an easy and accessible way to increase your tax savings and giving. If you have held publicly traded securities for more than a year, you can donate your shares directly to a nonprofit. The twin benefits of giving such an asset is that you will qualify for a charitable income tax deduction for the value of your gift (the average value of the shares on the date of transfer) and you won’t have to pay capital gains taxes on any appreciation. This means that you receive a deduction for those untaxed dollars without having to pay taxes on those gains, adding an additional tax benefit to your giving. You can even use the cash you would have given to charity and purchase the same shares on the same date which results in your portfolio remaining as it was before you made the donation, only without the untaxed gain!
Many families use business entities, like LLCs, as a way to operate their family business or to hold their real estate assets. While donating business interests involve much more processes and paperwork than cash gifts, they can still be a great tax and estate planning tool. These gifts are most often made before a potential liquidation event or as part of a sale or transfer of ownership. As the donor, you will have to obtain a qualified appraisal of your interest in the entity in order to claim a charitable deduction, but the gift can result in substantial tax savings from the value of the deduction and the reduction of capital gains tax.
Real estate is an asset that provides a substantial gift to a nonprofit and offers substantial tax savings to donors. With the potential of rising capital gains and estate taxes (as high as 45%), many donors would rather donate the rental property or farmland to support their community. The nonprofit will inspect the property and as the donor you will need to arrange an appraisal. Neither the transfer of appreciated property to a nonprofit nor the organization’s subsequent sale of the property will trigger any capital gains tax consequence for you, thus reducing your tax liability substantially compared to a regular sale. The extra steps needed to make a charitable gift of real estate are well worth it.
Traditional IRA assets are a very popular and particularly tax savvy way to fund your charitable giving. These gifts are most often made by donating your required minimum distribution from your retirement account during your lifetime or with a beneficiary designation. One especially helpful tool for lifetime giving from IRAs is a qualified charitable distribution (QCD). This tool allows donors aged 70½ or older to transfer up to $100,000 directly from their traditional IRA to the qualified nonprofit of their choice without having to recognize any income from the withdrawal. While you don’t qualify for a charitable deduction, the avoidance of income tax makes such a gift very appealing.
By Corey Grant,
Communications Specialist at CFA
Christian Foundation of America has expertise in handling complex gift transactions to convert assets into charitable resources. Our expert advisors are happy to answer your questions. Learn how to create a charitable fund with CFA.
Founded in 1981, Christian Foundation of America (CFA) is a full service community foundation capable of serving across the nation. We serve the Christian community broadly, including independent community churches, associations of churches, and Christian charitable organizations seeking more complex charitable planned giving services. We invite you to contact us to learn how we can serve you as individuals or families, to introduce charitable planned giving and legacy within your church, Christian charity or community. Explore our programs, and giving services anytime! With Christian Foundation of America, you can rest assured that your charitable funds, and even legacy bequests and gifts will be managed from a Christian perspective, with creative, and tax smart giving resources best suited to your needs.