Common types of charitable assets

 

This page contains information on the types of assets most typically used for charitable giving. See a pdf of Types of charitable assets (2018) for a side-by-side comparison of these assets. For more details on the charitable giving tax benefits associated with each asset, please consult a tax advisor if you are not one.

This page reflects the 2018 tax treatment of these assets. For 2017 tax treatments, please see Types of charitable assets (2017).

 

Including bonus and other cash windfall

For donors who...

  • Want easy contribution method; tax-efficiency is not primary concern
  • Receive a bonus/windfall and want to reduce tax liability2
  • Have maximized their giving of appreciated securities at lower limits and want to increase current year deduction by giving cash

Valuation

  • Amount of check, debit, or credit card, or other money transfer
  • Value of bonus/windfall donated

Tax benefits1

Donated in lifetime:
Charitable deduction for up to 50% of adjusted gross income (AGI)

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Complexity

Low

For donors who...

Have an employer with a matching gift policy

Valuation

Matching policies vary (i.e., 50%-100% or more of employee's gift)

Tax benefits1

No additional employee deduction from employer contribution

Complexity

Low

 

Held for more than 1 year.3 Including mutual funds, ETFs, and individual stocks and bonds

For donors who...

Hold appreciated securities and want to avoid tax on realized capital gains

Valuation

Mutual funds:

Closing price (net asset value) on date charity assumes control of donated shares, multiplied by number of shares donated

Individual stocks, bonds and ETFs:

Average of high and low selling prices on date charity assumes control of donated shares, multipled by number of shares donated

Tax benefits1

Donated in lifetime:

  • Charitable deduction for up to 30% of AGI if valued at fair market value (FMV)2
  • Can make a special election for deducting up to 50% of AGI instead by choosing to use cost basis. However, must also base deductions on cost basis for any other donations of appreciated securities or property during same tax year or carryforward period. Generally the special election is not advisable unless donated assets have limited appreciation.
  • No capital gains tax, including Medicare surtax if applicable

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Complexity

Moderate

Including QCDs from IRAs and remainder of IRAs

For donors who...

QCD from IRA:
Are age 70 ½ or older and must take annual required minimum distributions (RMDs) from their traditional, rollover, or Roth IRAs. Up to $100,000 of an annual RMD may be distributed directly to a charity through a qualified charitable distribution (QCD). This enables donors to avoid paying income taxes on that amount while satisfying the required distribution from their IRAs.

SEP and Simple IRAs also qualify for QCD treatment if donors are no longer receiving employer contributions. Employer-sponsored plans cannot allow QCD treatment.

Donor-advised funds, private non-operating foundations, and supporting organizations are not eligible to accept QCDs

Remainder of IRA:
Have an IRA on which they no longer depend; can name charities as sole beneficiary to reduce heirs’ estate tax and future income tax liability

Retirement plans, unlike other appreciated assets, are not eligible for step-up in basis upon being inherited by heirs. This can make them more valuable to donate to charity. (Step-up would allow heirs to calculate valuation of basis at time of inheritance, rather than donor’s initial cost.)

Valuation

QCD from IRA:
Amount of RMD directly distributed to charity

Remainder of IRA:
Amount of account balance or portion donated

Tax benefits1

QCD from IRA:

Donated in lifetime:
QCD satisfies RMD and is not taxable as income. However, QCD does not produce an additional charitable deduction.

Donated as estate bequest:
QCD distributions are removed from IRA owner's estate, reducing estate tax for heirs

Remainder of IRA:

Donated in lifetime:
Charitable deduction based on donated amount, up to 50% of AGI

Donated as estate bequest:
If charity is named as beneficiary of remainder of IRA, value of account is removed from estate, reducing estate tax for heirs (as well as future income taxes they would have had on it)

Complexity

Moderate

Including real estate and tangible property such as artwork and collectibles 

Held for more than 1 year3

For donors who...

Own highly appreciated property and want to avoid or reduce income and capital gains taxes when ready to sell

Valuation

Real estate:
FMV minus any amount still owed (i.e., outstanding mortgage)


Artwork and collectibles:
Donations of artwork and collectibles are subject to "use test" to determine whether valuation should be based on FMV or limited to cost basis

Tax benefits1

Donated in lifetime:

  • Charitable deduction for up to 30% of AGI if considered a capital asset²
  • No capital gains tax, including Medicare surtax if applicable

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Complexity

Complex

 

Held for more than 1 year3

For donors who...

Have beneficiaries who are financially independent and want to liquidate a valuable yet less productive asset to receive immediate income tax deduction

Valuation

Lesser of adjusted cost basis or cash surrender value of whole life, universal life, variable, or limited pay insurance policies

Tax benefits1

Donated in lifetime:

  • If charity is named owner and beneficiary, donor will receive charitable deduction based on lesser of cost basis or cash value of policy, up to 50% or 30% of AGI, depending on policy
  • If charity is only named beneficiary, donor will not receive deduction

Donated as estate bequest:
If charity is named owner and beneficiary, avoid possible inclusion of proceeds in estate

If charity is only named beneficiary, value of account is removed from estate, reducing estate tax for heirs

Complexity

Complex

For donors who...

Own shares in a closely held business and want to avoid capital gains tax that would result from selling shares to new owner

Valuation

FMV as determined by independent appraisal

Tax benefits1

Donated in lifetime:

  • Charitable deduction based on FMV (or cost basis for ordinary assets), up to 30% of AGI
  • No capital gains tax, including Medicare surtax if applicable

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Complexity

Complex

Held for more than 1 year3

For donors who...

Hold appreciated shares in a hedge fund and want to avoid tax on unrealized capital gains

Valuation

Value of holdings less amount held back to cover cost fluctuation that might occur before sale

Tax benefits1

Donated in lifetime:

  • Charitable deduction based on FMV, up to 30% of AGI
  • No capital gains tax, including Medicare surtax if applicable

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Complexity

Complex

Held for more than 1 year3

For donors who...

Hold IPO shares and want to avoid capital gains and reduce concentrated equity holdings in tax-efficient manner

Valuation

FMV

Tax benefits1

Donated in lifetime:

  • Charitable deduction based on FMV, up to 30% of AGI
  • No capital gains tax, including Medicare surtax if applicable

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Complexity

Complex

Held for more than 1 year3

For donors who...

Want to avoid tax liability on income and capital gains of interest in private equity

Valuation

FMV as determined by independent appraisal. Cost basis if donated to private foundation.

Tax benefits1

Donated in lifetime:

  • Charitable deduction based on FMV, up to 30% of AGI
  • No capital gains tax, including Medicare surtax if applicable

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Complexity

Complex

Held for more than 1 year3

For donors who...

Hold appreciated restricted stock and want to avoid unrealized capital gains and reduce concentrated equity holdings in tax-efficient manner

Valuation

FMV as determined by independent appraisal. Cost basis if donated to private foundation

Tax benefits1

Donated in lifetime:

  • Charitable deduction based on FMV, up to 30% of AGI
  • No capital gains tax, including Medicare surtax if applicable

Donated as estate bequest:
Full value is removed from estate, reducing estate tax for heirs

Complexity

Complex


1 Deductibility of asset depends on type of giving tool, option or organization it is donated to. Tax law imposes lower deduction limits for charitable contributions made to certain organizations. Contributions that would otherwise qualify for a deduction of up to 50% of AGI will be limited to 30% of AGI if they are made to veterans’ organizations, fraternal societies, nonprofit cemetery, or most types of private non-operating foundations. Contributions of capital gains property that would otherwise qualify for a deduction of up to 30% of AGI will be limited to 20% of AGI if they are made to the same organizations listed above. To determine which deduction limitations apply to a specific organization, consult the IRS

2 Contributions above limit can be carried forward for up to 5 years.

3 Donors can donate appreciated assets held for 1 year or less but tax rules will differ. 

If assets have decreased in value, it is generally more advantageous to sell them for cash and donate cash, while claiming a capital loss and potentially reducing tax liability.

For more details on the tax implications of donating these types of charitable assets, please consult a tax advisor if you are not one.