| y"> | | | | contribution is reduced by all of the unrealized |
| The tax code allows individuals a tax deduction for | | | | appreciation in the value of the property. This election |
| contributions to charitable organizations that are | | | | is typically made when the donor wants a larger |
| tax-exempt under section 501(c)(3). In general, the | | | | deduction during the year that a gift is made of |
| donor is entitled to deduct the fair market value of | | | | property that has not yet fully appreciated in its value. |
| property donated to a 501(c)(3) organization. However, | | | | The fourth and fifth percentage limitations apply to gifts |
| the extent of charitable contributions that can be | | | | to private foundations. Under the fourth limitation, |
| deducted for a particular tax year is limited to a certain | | | | contributions of cash and ordinary income property to |
| amount of an individual's contribution base, essentially | | | | private foundations may not exceed 30% of the |
| an amount equal to their adjusted gross income- the | | | | donor's contribution base (AGI). The carry over rule |
| donor's taxable income before claiming itemized | | | | also applies to these gifts. |
| deductions like mortgage interest or charitable | | | | Finally, the fifth percentage limitation is 20% of an |
| contributions. The level of annual deductibility is subject | | | | individual donor's AGI on gifts of capital gains property |
| to certain five percentage limitations, and is subject to | | | | donated to private foundations. |
| several factors, including the nature of the charitable | | | | For corporations, different percentage limitations are in |
| recipient and the nature of the property donated. | | | | place. Deductible contributions for a corporation are |
| The first three limitations apply to gifts made to public | | | | limited to 10% of the tax year's pre-tax net income. |
| charities and private operating foundations. First, there | | | | Excess may be carried over and deducted in |
| is a limitation of 50% of a donor's adjusted gross | | | | subsequent years. For corporations, the tax laws do |
| income for gifts of cash and ordinary income property | | | | not differentiate between gifts to public charities and |
| made to either of the aforementioned types of | | | | gifts to private foundations. |
| organizations. For example, a donor whose AGI is | | | | As you plan for charitable giving, and consider its |
| $100,000 for the year may deduct charitable donations | | | | subsequent tax benefits, it is also important to keep in |
| up to $50,000. While the donor may give as much as | | | | mind what types of contributions are not tax |
| they choose, they are simply limited to the amount | | | | deductible. These include: |
| they can claim as a write off. If the donor does | | | | - Contributions to political parties, political campaigns, or |
| choose to make contributions in excess of the 50%, | | | | political action committees. |
| the excess may generally be carried over and | | | | - Contributions given to individual people. |
| deducted in subsequent years. | | | | - Fees or dues paid to professional associations. |
| The second percentage limitation for gifts to public | | | | - Contributions to labor unions, chambers of commerce, |
| charities and private operating foundations is 30% of | | | | or business associations. |
| their AGI for gifts of capital gains property (stocks, | | | | - Contributions to for-profit schools and hospitals. |
| bonds, real estate, and the like). Any excess of the | | | | - Contributions to foreign governments. |
| 30% is also subject to the carry forward rule. A donor | | | | - Fines or penalties paid to local or state governments. |
| who makes contributions of both cash and capital | | | | - The value of your time for services rendered to a |
| gains property during a single tax year is subject to a | | | | non-profit. When giving to charity, it's always a smart |
| combination of these percentage limitations, so that the | | | | idea to first conduct some due diligence. Make sure |
| total deduction does not exceed the 50% limitation. | | | | the charity is a qualified, and you obtain a receipt for |
| The final limitation for gifts to public charities and | | | | your donation. As a reminder, charitable donations must |
| private operating foundations allows a donor of capital | | | | be made by December 31st. This is true whether you |
| gains property to take advantage of the 50% limitation, | | | | give money or donate non-cash goods. |
| instead of the 30% limitation, when the amount of the | | | | |