Deciding What to Give
Securities - Giving stocks, bonds or mutual funds that have increased in value may help you reduce taxes and conserve cash.
- Retirement plan distributions - These assets can be a practical resource for charitable gifts now or in your long-range estate plans.
- Life insurance policies - Using life insurance for gifts to American Diabetes Association can be a convenient way to make a tax-effective gift.
- Real estate - An often overlooked resource, real estate can be an excellent way to make a meaningful gift that could enhance your income or generate tax savings.
- Other items of value (jewelry, artwork, collections, antiques, automobiles, etc.)
After considering the properties you own, you may find a gift of property other than cash to be an attractive alternative. Giving in this way may enable you to make gifts while conserving cash for other uses and enjoying what may be greater tax savings than those provided by gifts of cash.
When Property is Worth More
If you have property, such as stocks and mutual funds, that is worth more than you paid for it and it has been owned for more than a year, you may enjoy greater tax savings from giving that property than from giving the same amount of cash. You may also receive a charitable income tax deduction based on the property’s current value, not just its original cost.
Planning Tip: If you have owned a security for more than a year, it has increased in value, and you think it may be worth more in the future, it may be best to give the stock and simultaneously repurchase the same number of shares with the cash you otherwise would have used to make the gift. This will increase the basis in your stock to 100% of its current value and save you capital gains taxes in the future should you sell the stock. This may also make it possible to benefit from a deductible loss should the stock decline in value before it is sold.
Giving Property That Has Declined in Value
If you have stock or other investment property that is worth less than it cost, you will normally save more in taxes by selling that property and giving the proceeds. You may then be able to claim a capital loss on your tax return and also deduct the cash proceeds you give as a charitable gift. The result can be to enjoy tax deductions that actually total more than the current value of the asset while making a meaningful gift.
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