Help a Charity, Help Yourself

If you’re like most Americans, your budget includes donations to charities. You realize that churches, research groups, schools and organizations that help the needy serve important functions in our society, and you support them with your donations.

In 2010, the last year for which statistics are available, American taxpayers claimed deductions for $170.23 billion of charitable donations. That was up 7.7% from the $156.01 billion claimed for 2009.

Most of the reported donations, 81.2% or $138.24 billion, were cash donations. But the $32 billion of non-cash donations deserve a special mention. Non-cash donations can provide a special benefit to the donor: Most assets in this category are those that, if sold, would result in a capital gain and therefore taxes.

Income tax planning frequently involves postponement or avoidance of paying tax. By making a charitable donation of property that if sold would result in a long-term capital gain, a taxpayer can avoid paying taxes on that gain, yet take a deduction for the entire value of the property.

In its spring 2013 issue of Statics of Income Bulletin, the IRS reported the following charitable donations of non-cash property:

  • Corporate stock with an average deduction of $49,331 (123,109 returns);
  • Mutual fund shares with an average deduction of $74,180l (8,327 returns);
  • Art and collectibles with an average deduction of $9,624 (84,600 returns);
  • “Other investments” such as bonds, annuities, CDs, life insurance policies, notes, options, partnership interests and real estate investment trusts with an average deduction of $503,543 (3,135 returns);
  • Land with an average deduction of $75,145 (7,381 returns);
  • Clothing (5,695,243 returns) and household items (2,527,796 returns) – although it’s highly unlikely that these donated items would have resulted in a capital gain if sold.

There are many special considerations that must be made before making non-cash charitable donations. Call one of our advisers if you’d like to discuss your particular situation.