Charitable Giving of Appreciated Stock: Good for Your Heart and Your 1040!
An economic downturn may not seem like the best time to increase charitable giving, but at the same time, the need for funding at many nonprofits is especially acute as a result of the current economy. In addition to supporting a worthy cause, you or your business can help lower your tax bill through cash donations, as well as contributions in the form of unused inventory or sponsorship.
Choosing an Organization
When it comes to tax deductions for charitable giving, the rules are complicated. As you begin to formulate a giving strategy, be sure that the organizations you intend to support have been awarded tax-exempt status by the Federal government. In addition to not-for-profit organizations engaged in charitable activities, qualified groups include nonprofit schools and hospitals, most churches and religious organizations, veterans’ groups, and public parks and recreational facilities. You cannot deduct contributions made to political or lobbying organizations, most foreign charities or sports clubs, or for-profit groups.
If you are not sure if a group you are interested in supporting is qualified to receive deductible contributions, you can search for the name of the organization on the IRS website at https://www.irs.gov/charities-non-profits/exempt-organizations-select-check.
Gifts of Appreciated Property
When planned properly, gifts of appreciated property to charity may allow you to avoid the capital gains tax you would have owned when the asset what sold and may also allow you to receive an income tax deduction, usually worth the fair market value (FMV) of the property. Also, by removing that asset from your estate, you may reduce your potential estate tax burden.