Know which type of asset donation will do the most good in the community and provide you with the biggest tax benefit.
There is still time to plan for your charitable giving in 2023, and there are many options beyond writing a check. Sometimes, utilizing other assets can have the dual advantages of maximizing tax benefits for you and your family and allowing you to give more to nonprofits. This ensures that your donations have the greatest impact in the community while also providing you with the most tax advantages possible.
While cash is easy to donate, it may not be the right option for all situations. Below are some examples of non-cash assets you can donate that will benefit your favorite nonprofits and your tax planning.
Charitable IRA Rollover
If you own an IRA, a Charitable IRA Rollover (also known as a Qualified Charitable Distribution) is a tax-savvy way to use your retirement assets during your lifetime to make charitable gifts.
If you are 70½ or older, you can donate up to $100,000 per year ($200,000 for a married couple) from an IRA directly to a charitable organization, including a fund at the Omaha Community Foundation. The donation is excluded from your taxable income and counts toward your required minimum distribution if you are required to take one.
The Charitable IRA rollover operates separately from the percentage rules that limit the tax benefit of individual charitable giving. So, if you are inclined to give more than the standard deduction, this rollover is a great option for you. You may find that the rollover provides greater tax savings than cash donations because your adjusted gross income is lower.
In addition, if you name a nonprofit as a full or partial beneficiary on your IRA or other retirement accounts, neither you nor your heirs will pay taxes on that portion of the distribution.
Donating real estate is another fantastic way to support causes you care about. It is also one of the most financially beneficial types of gifts for donors.
As with gifts of other long-term appreciated assets, donating real estate to a charitable organization, such as a Donor Advised Fund at the Omaha Community Foundation, is generally deductible at the property’s fair market value at the time of the gift and avoids capital gains taxes. That means the charity will receive more value from the property donation than if you sold the property then donate the proceeds.
Your real estate donation can also support nonprofits for years to come with a Charitable Remainder Trust. The trust produces income for you during your lifetime, then the remainder goes to a charitable organization of your choice named as your beneficiary. Naming a Donor Advised Fund at the Omaha Community Foundation as your beneficiary has a variety of benefits: the ability to support organizations directly from the fund, working with us to leverage our deep knowledge of the community and its needs, and building a lasting legacy your family can continue to participate in.
The income tax deduction takes place when your property is transferred into the trust based on the present value of the assets that will eventually go to the charity.
Business Interests and Stocks
Business owners can also take advantage of tax-wise charitable giving. If you plan to sell your business, pass it to the next generation, or hold long-term highly-appreciated stock, consider donating some of your closely held or publicly traded stock to your favorite nonprofit.
Donating stock outright avoids capital gains tax. The transaction results in more dollars to support causes than you would have had if you had sold the asset, paid capital gains, and given the remaining proceeds to charity.
This is the perfect time of the year to think through how to enhance tax planning while supporting your community.
If you have any questions about charitable giving, reach out to the team at the Omaha Community Foundation about ways to increase your impact with the most tax-effective method: 402-342-3458 or email@example.com.
Disclaimer: This blog provides an overview of the possible tax advantages of donating non-cash assets and is not intended to provide tax or legal guidance. The Omaha Community Foundation recommends discussing these strategies with your accountant, financial advisor or attorney.