Getting the Best Tax Benefit Out of Your Charitable Contribution

If you are looking to maximize the power of your charitable contributions — to make a single asset make more of a difference to the causes you care about — consider donating your long-term appreciated securities (stocks, bonds or mutual funds), property, collectibles or other assets. 

Why is contributing your long-term appreciated assets so beneficial for tax purposes? 

·         If the long-term appreciated assets are donated rather than sold, capital gains taxes from selling them no longer apply. The more appreciation the asset has, the greater the tax savings will be.  This can be a tax savings of up to almost 30% on the gain. With the federal long-term capital gain rate as much as 20%, then add to that the new potential investment tax of 3.8%, and a state tax of 5%, it adds up quickly.

·         If you take itemized deductions on your return, the appreciated assets donated to a public charity are taken at its full fair market value, on up to 30% of the donor's adjusted gross income.  This reduces your taxable income, which in 2013 can be a tax savings of as much as 44.6%.

By taking advantage of the applicable tax incentives, donors can significantly increase the amount of funds available to them for charitable giving.

If you are donating anything other than publicly traded securities, the charitable institution will need time to make sure they are willing and able to accept your charitable contribution.  Accordingly, it is important to not wait until the end of the year to make this type of donation, or you may simply run out of time to get everything done. 

Since the tax benefit and charitable benefit of these types of contributions can vary so widely, if you are interested in donating appreciated assets to your favorite charity, please give us a call, so that we can discuss your individual situation.