Advancement & Public Services
Outright Gifts of Cash
Simplicity and ease of delivery are the major factors in making cash the most popular type of charitable gift. A gift of cash is considered made on the date it is hand-delivered or postmarked, if mailed. So a year-end contribution made by a check that is mailed in late December is deductible for that year even though it may not be received by the charity until January.
Because of the charitable deduction, the net cost to the donor who makes a cash contribution will be lower than the face value of the gift. Gifts of cash are deductible up to 50% of a donor's adjusted gross income (AGI). Any excess can be carried over for five years.
Gifts of Appreciated Property
A viable alternative to a cash gift is a gift of property. With careful planning, charitable gifts of certain types of assets will provide even greater tax benefits to the donor than a gift of equivalent value in cash.
The most favorable tax benefits are generated by contributions of appreciated, long-term capital-gain securities and real estate. Reason: In addition to receiving a charitable deduction for the full fair-market value of such a gift, the donor escapes any potential tax on the capital-gain element in the gifted property and any sales commission that would be payable upon the sale of the asset.
The full fair-market value of gifts of long-term capital-gain securities or real estate is deductible up to 30 percent of a donor's AGI. Any amount in excess of the 30 percent ceiling can be carried forward for five years.
A donor considering a gift of property that has gone down in value would be better off selling the property to realize a deductible loss and then contributing the proceeds to charity and obtaining a charitable deduction. This procedure ensures recognition and deductibility of the loss.
Tangible Personal Property
As with gifts of long-term, capital-gain securities or real estate, a donor is entitled to a charitable deduction for a gift of long-term, capital-gain, tangible personal property, such as works of art, rare books, and stamp or coin collections, etc. (Note: The capital gain on such assets continues to be taxed at the maximum percentage rate). The extent of the allowable deduction for such a gift is dependent upon the so-called standard of "related use."
How the standard is applied
If the use of the contributed property is related to the exempt purposes of the charity (e.g. a painting to a museum or rare books to a library), the donor is entitled to a charitable deduction for the full fair-market value of the property — subject to the 30 percent ceiling and carryover.
Note: When the donor is the creator of the contributed tangible asset, his or her deduction is limited to the actual cost of producing the asset.