What To Give

Listed below are some of the most common types of assets that can be donated to charity and some of the tax implications. This information is intended as a very brief overview of options. Please consult a professional advisor for more information before making any major giving decisions.

Cash and Cash Equivalents
Most of us are familiar with donating cash to charities. If you itemize your deductions on your personal federal income tax return, you may take a charitable gift deduction for the amount of your charitable gift of cash or cash equivalents (certificates of deposit, savings bonds, money market fund, etc.).

When savings bonds, certificates of deposit and other ordinary income assets are given to charity, the recipient charity, unlike the family, will not have to pay tax on the gain in those assets. You can name the charity as the primary or contingent beneficiary, or as a partial beneficiary.

Publicly Traded Securities
You can transfer ownership of appreciated securities owned for at least one year to a charity and receive a deduction for the average value of the security on the day of transfer. When the security is sold by the nonprofit, neither the donor nor the organization will have to pay capital gains tax. You receive the benefit of having your gift valued at fair market value, including the appreciation, for the purpose of determining your charitable deduction.

Life Insurance
By designating a nonprofit as the beneficiary of a new or existing life insurance contract, you can make a significantly larger charitable gift than may be possible out of your current assets. And, if you make a charity the owner of the contract, you can deduct the premiums as you pay them. Or, if you would rather retain the right to change beneficiaries on the contract and don’t care if you can’t deduct the premium, you can remain owner of the contract and simply name the charity as partial, sole or contingent beneficiary.

Real Estate
You can make outright gifts of real estate to a charity. If you have owned the donated property for at least one year, both you and the charity can avoid paying capital gains taxes on the appreciation in the value of the property. Outright gifts of real estate will often result in an income tax deduction equal to the fair market value of the property, as determined by appraisal, but there are some situations where this may be reduced.

It is also possible to make a gift of your personal residence, vacation home, or farm to a charity and retain a “life estate” in the property, allowing you to retain rights to use or rent out the property during your lifetime. You deed the property directly to the charity subject to your retained life estate, receive an immediate income tax deduction for a portion of the appraised fair market value, and have the comfort of knowing that the property will be excluded from probate.

Personal Property
Personal property, such as artwork, cars, clothing and jewelry, can be given to charity. However, unless the charity will actually use the property in connection with its stated mission, you can deduct only your cost basis, not the fair market value, of the property. Always ask how your gift will be used. If the property has depreciated in value from the original cost (typically the case with cars and clothing) then the deduction will be at its current value.

In-Kind Gifts and Pro Bono
In addition to cash contributions, some companies donate their products (“in kind” gifts) or offer their services on a free (“pro bono”) basis to various charitable organizations. Many companies have products that can be used by nonprofits, including products from current inventory, obsolete merchandise, returned or slightly damaged goods, computers or office furniture and equipment. Nonprofits can also benefit from services provided by a company or its employees, such as printing, legal representation or publication design.

A company’s charitable donation of its products can qualify for a charitable deduction. However, limitations exist on what and how much can be deducted.

The rules are complicated and require careful prior analysis by corporate or outside counsel. The value of staff time donated to a nonprofit organization is non deductible, although out-of-pocket expenses such as gas, mileage, meals, etc. for such volunteer work may be deducted within certain limits.

Volunteer Time
In addition to giving dollars, one of the most important ways to help nonprofit organizations in your community is to give of your time. Nonprofit organizations are in great need of capable, committed volunteers, and your volunteer contributions can leverage the financial contributions you make to an organization.