People give for myriad reasons: God calls us to be generous; we feel passionate about supporting a cause he has put on our heart; we want to support our churches. But the fact remains that giving wisely is godly too, and tax-wise strategies can help.
Charitable tax deductions can reduce the amount of taxes you pay and enable you to give more to the causes you care about. To help you make the most of your giving, we’ve answered a few common tax questions below.
- How much of the appreciated assets we gifted last year can we deduct?
Generally, if you are itemizing, and you gave to a public charity (including a donor-advised fund, like your Giving Fund at NCF), you can deduct up to 30 percent of your adjusted gross income (AGI) for appreciated assets. If you gifted more than that, you can generally carry the excess forward up to five consecutive years. Note that non-cash gifts cannot make up all of the 100-percent-AGI charitable deduction allowed in 2020 and 2021 for individuals. You can learn more about how to structure a gift of 100 percent of your AGI here.
- What do I need to do to claim a charitable deduction for a non-cash gift?
If you made a non-cash gift, you’re required to submit an IRS Form 8283 with your tax return. Additionally, if you made a non-cash gift of more than $5,000 (other than publicly-traded securities), you must obtain a qualified appraisal and have the charity and the appraiser sign your Form 8283. If the value of the gifted asset is over $500,000 then you must also attach the qualified appraisal to the IRS Form 8283.
- Can I deduct the entire value of my appreciated asset gift this year?
How much you can deduct depends on two factors: the type of gifted asset and the type of charity it’s being gifted to.
Tangible personal property (jewelry, art, or antiques), intellectual property and life insurance policies are generally deducted at a lower level, the lesser of the fair market value or cost basis. Gifts of closely held business, real estate, and publicly traded securities can usually be deducted at fair market value when donated to a public charity, including a donor-advised fund sponsor or supporting organization.
- If I gifted an appreciated asset, can’t I just deduct how much it sold for?
No! Generally, a deduction is determined based on fair market value at the time of the gift (or, in certain situations, the cost basis), regardless of what a gifted asset sells for after the gift. Additionally, if the value exceeds $5,000, the Internal Revenue Code requires the asset to be valued by a “qualified appraiser,” and such a valuation may be discounted by the appraiser for lack of control and lack of marketability.
- What other factors might impact your deduction?
We recommend you consult with your tax expert, because when you deduct charitable gifts of certain appreciated assets, your deduction may be reduced by valuation discounts, ordinary income assets, or debt.
- If I gifted publicly traded securities what is the value of the gift?
For deduction purposes, the value of publicly traded securities is generally the mean value between the highest and lowest sale prices of the security on the day the charity receives the gift.
Still have questions? If you want to be sure you’re giving in the best and most strategic way, contact your local NCF office to help you make a plan that will get more money to the charities, churches, and causes you love.