Tag Archives: Charity

What to Know When Donating Appreciated Assets

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Are you charitably inclined? If so, you probably know that donations of long-term appreciated assets, such as stocks, have an advantage over cash donations. But in some cases, selling appreciated assets and donating the proceeds may be a better strategy. That’s because adjusted gross income (AGI) limitations on charitable deductions are higher for cash donations. Plus, if the assets don’t qualify for long-term capital gain treatment, the deduction rules are different. Here’s what to know when donating appreciated assets.

Tax Treatments by Type of Gift

All things being equal, donating long-term appreciated assets directly to charity is preferable. Not only do you enjoy a charitable deduction equal to the assets’ fair market value on the date of the gift (assuming you itemize deductions on your return), you also avoid capital gains tax on their appreciation in value. If you were to sell the assets and donate the proceeds to charity, the resulting capital gains tax could reduce the tax benefits of your gift.

But all things aren’t equal. Donations of appreciated assets to public charities are generally limited to 30 percent of AGI, while cash donations are deductible up to 60 percent of AGI. In either case, excess deductions may be carried forward for up to five years.

Work the Math

If you’re contemplating a donation of appreciated assets that’s greater than 30 percent of your AGI, crunch the numbers first. Then determine whether selling the assets, paying the capital gains tax, and donating cash up to 60 percent of AGI will produce greater tax benefits in the year of the gift and over the following five tax years. The answer will depend on several factors, including the size of your gift, your AGI in the year of the gift, your projected AGI in the following five years, and your ability to itemize deductions in each of those years.

Before You Donate

Before making charitable donations, discuss your options with us. The tax professionals at Ramsay & Associates can help you understand what to know when donating appreciated assets so that you can make charitable gifts at the lowest tax cost.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Vacation Donation – Hurricane Sandy

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After large scale natural disasters, many companies allow employees to donate the value of unused vacation time, sick time, or general paid time off (PTO) to a charitable organization.

In the case of Hurricane Sandy, the IRS has announced that donations made to qualifying charities for hurricane relief prior to January 1st, 2014 will not be considered income to the employee.  Since the employee does not pick up the value of time donated in income, there is no charitable contribution deduction allowed on the employee’s tax return.

Also, in this case, the employer deducts the value of the donation as  a charitable contribution rather than as salary expense.