A Tax-Saving Way to Make an Impact!
If you're planning a charitable gift, a basic rule is this: Don't write a check without first looking at the appreciated, marketable property you own.
Helen followed this rule and was very pleased with the results. Helen had always wanted to make a substantial gift to the TMC Foundation, and just recently realized she was finally in a financial position to make it - a $10,000 donation in memory of her husband.
What brought her to this realization? The stock she had purchased years ago for $2,000 reached a market value of $10,000 - the amount she felt was "right" for her charitable gift. Helen thought about cashing in the stock and using the proceeds for her gift. But a member of the TMC Foundation staff told her about another option.
Helen could donate the stock itself, instead. She received a chart from the Foundation to illustrate the difference this would make.
|Sell Stock, Use Cash for Gift||Make a Direct Gift of Stock|
|Value of Stock||$10,000||$10,000|
|Capital Gains tax (20% on $8,000 gain)||$(1,600)||$0|
|Funds available for gift||$8,400||$10,000|
|Value of charitable deduction (28% tax bracket)||$2,352||$2,800|
By choosing this second option, Helen was able to make the full $10,000 gift without using any other assets besides the stock, because she saved the $1,600 she would have paid in capital gains tax. Plus, contributing the stock instead of the proceeds from the sale gave her an extra $448 in income tax savings!When to Give
Timing your charitable gift is important if you itemize deductions on your income tax return. Make a gift by Dec. 31, and you'll be rewarded with a tax break for that tax year. This tax break reduces the actual cost of your gift.
For example, say a person who pays taxes at a 31 percent federal rate makes a gift of $1,000. It's as if that person has actually spent only $690. The $310 difference is the tax that the donor would have paid anyway had no gift been made.
Without the deduction, the donor might make a gift of only $690 (the same cost), but because of the deduction, TMC Foundation benefits by $310 more. This means that the gift generates 45 percent more benefit to our community's health care because of the deduction!What to Give
You aren't limited to giving cash. In fact, your tax benefits can be even greater if you give other property, such as assets that have appreciated in value.
Long-term capital gain property includes securities (like stocks and bonds) and real estate (like a home and land) that has been held for more than a year and that are worth more now than when you acquired them. You still receive a charitable deduction for donations of these assets, and it's based on their fair market value on the date of the gift. But there's a bonus - you avoid all federal capital gains tax that would otherwise be due on a sale of the assets.
The key is to give these securities directly to TMC Foundation, rather than selling them and donating the proceeds. If you get creative, you can probably think of all sorts of potential gifts - a building, an art collection, a life insurance policy, jewelry, retirement plan assets, etc. You might even consider a "bargain sale" gift, in which you sell an asset to TMC Foundation for less than what it's worth and take a charitable deduction for the difference. We'd be glad to explain the benefits to you for any gift you'd like to give.How to Give
You could make an outright donation now and obtain a tax deduction for the full value of your gift. Or you could set up a deferred gift plan that also gives you a tax break now, even though your actual donation will be made at a later time.
One example of a future gift with current tax benefits is a charitable remainder trust. You irrevocably place assets into a trust. You (or someone else you choose) will receive income each year from the investment of those assets. When the trust term runs out (perhaps after the lifetimes of all income beneficiaries), TMC Foundation receives the assets remaining in the trust.
If you establish this trust by Dec. 31, you'll obtain a charitable deduction for that tax year based on the amount that TMC Foundation would someday receive. Many variations of this plan exist, so please call us if you'd like more details.Why to Give
We've been emphasizing the tax breaks that result from a charitable gift. We think it's wonderful that the government recognizes the good work that we do for our community and therefore encourages gifts to our organization with tax incentives. When you calculate your deductions and the resulting tax savings, you may discover that you can make an even larger gift than you thought possible.
But the tax advantages are only one benefit. As a loyal supporter, you know that the personal satisfaction of playing a role in furthering our mission and making a difference in the lives of others is equally rewarding. And please know that we sincerely thank you for your belief in Tucson Medical Center and the foundation.
As you think about the kind of year it's been and what your charitable plans for the future are, feel free to call on us for additional information about the ideas in this article. Our help is given in strict confidence and without obligation. Call the TMC Foundation at (520) 324-5982.