Tips for Donors

Choosing the right assets as well as the appropriate timing and gifting vehicles will help to maximize your charitable impact as well as provide you with the maximum financial benefits for you and your family. Here are five Tax Wise Tips for Donors.

Tip #1. You already have a charitable partner - the government.

Since 1917, Congress has granted favorable tax treatment to individuals who choose to make charitable contributions to the charities of their choice- whether through Outright Gifts or Remainder Gifts. Through the effective use of charitable deduction, the government shared in the amount of the ultimate gift by reducing the amount of taxes that you would otherwise pay.

Tip #2. Give while you live - it's a tax wise idea!

The reason this is a tax wise idea is because of the federal and state income tax deduction. Charitable gifts made during your lifetime provide an income tax deduction not available through a Remainder Gifts. Because you are no longer able to include Outright Gifts in your estate, these gifts ultimately avoid estate taxes as well.

Tip #3. Giving assets is better than giving cash, especially long-term, highly appreciated assets.

This is because of the dual tax benefit of an income tax deduction based upon the fair market value of the gift plus the added benefit of avoiding the capital gains tax.

Tip #4. Income plans provide three powerful benefits.

First, they provide significant income tax and estate tax benefits. They also provide a lifetime income stream as well as a significant remainder gift to charity. Income Plans offer you the opportunity to make a current commitment to charity, receive a lifetime income stream, avoid immediate capital gains tax on a gift of appreciated property, receive an income tax deduction for a percentage of the total amount gifted and remove the property from your estate which may provide significant estate tax savings.

Tip #5. Don't forget about your pension plan as a giving opportunity.

Income in respect of decedent assets such as a pension plan generally provide better tax benefits in a testamentary gift. The best type of asset to gift to charity through an estate will normally be an asset that produces taxable income. Most assets that an heir inherits are free from income tax. However, with the exception of a surviving spouse, an heir will pay income tax on amounts received from a decedents' retirement plan. If you are going to make a charitable bequest, it is usually better to transfer assets subject to income tax to charity and transfer non-taxable assets to heirs.

Prospective donors are advised to seek the advice and assistance of a tax professional before entering into any charitable planned gift. If we can help, please contact the Community Foundation of Northeast Iowa.

Learn more about...

Outright Gifts — gifts you can give now
Remainder Gifts — gifts after death
Income Plans — gift instruments allowing income
Tribute and Memorial Gifts — special people deserve special recognition