Tax Advantages of Donor-Advised Funds
The Benefits of Charitable Giving
There are financial incentives for Americans to give generously to charity. When you donate to an IRS-qualified 501(c)(3) public charity like GlobalTrust Funds, you are able to take an immediate charitable deduction. The purpose of charitable tax deductions is to reduce your taxable income. This allows the donor to lower their tax liability, and for larger estates the amount can be quite significant, all while supporting charitable organizations who make a difference in the world.
Please check with your tax advisor to determine the effective tax savings per asset type, length of asset ownership and donation amount to better understand how a charitable giving strategy could benefit you.
The Benefits of Charitable Giving
There are financial incentives for Americans to give generously to charity. When you donate to an IRS-qualified 501(c)(3) public charity like GlobalTrust Funds, you are able to take an immediate charitable deduction. The purpose of charitable tax deductions is to reduce your taxable income. This allows the donor to lower their tax liability, and for larger estates the amount can be quite significant, all while supporting charitable organizations who make a difference in the world.
Please check with your tax advisor to determine the effective tax savings per asset type, length of asset ownership and donation amount to better understand how a charitable giving strategy could benefit you.
What can I deduct?
In order to take a tax deduction for a charitable contribution to an IRS-qualified 501(c)(3) public charity, donors often forgo the standard deduction in favor of itemized deductions. This means you will list all of your deductions, with the expectation they will add up to more than the standard deduction.
The most common expenses that qualify include:
- Mortgage interest
- State and local tax
- Charitable giving
- Medical and Dental expenses
- Other considerations may apply to high-net worth estates
When you donate cash to an IRS-qualified 501(c)(3) public charity, you can generally deduct up to 60% of your adjusted gross income. Provided you have held them for more than a year, appreciated assets, including long-term appreciated stocks and real estate, are generally deductible at fair market value up to 30% of your adjusted gross income and can be carried forward a number of years if necessary. Combining more than one type of asset can be a tax-efficient move to maximize the amount that you can take as a charitable tax deduction.
How do I claim a charitable contribution deduction?
Once you’ve decided to give to charity, consider these steps if you plan to take your charitable deduction. First, make sure the non-profit organization is an IRS-qualified 501(c)(3) public charity or private foundation. Keep a record of the contribution such as saving the tax receipt the charity provided you on the day of donation. If providing a non-cash donation, you may need to obtain a qualified appraisal to substantiate the value of the deduction you are claiming. With your paperwork ready, itemize your deductions and file your tax return. We encourage you to speak with your tax advisor when considering gifts to charity.
Can I take a Fair Market Value deduction for donating private S-corp or C-corp stocks to charity?
Yes, it’s possible to deduct the full fair market value of the contribution if the recipient organization is a public charity. Tactically, the answer depends on whether the charity is able to accept private stock as a gift. Most charitable organizations simply don’t have the resources, expertise or appetite to efficiently accept and liquidate these types of assets, particularly in a time crunch at the end of the year when most people consider charitable giving.
GlobalTrust Funds has in-house specialists who work with donors and their advisors to facilitate charitable donations of S-corp and private C-corp stock among many other asset types. Once you donate to GlobalTrust Funds and the asset is sold, you are able to recommend grants to your favorite charities quickly and easily.
By donating private stock, you generally do not pay capital gains taxes on GlobalTrust Funds subsequent sale of the stock. There is a second tax benefit also. Donors are generally able to deduct the full Full Market Value as determined by a qualified appraisal. These two benefits provide donors with large estates substantial tax savings, all while maximizing the dollars gifted to charity
Consult your Advisors
The tax information provided is general and educational in nature, and should not be construed as legal or tax advice. GlobalTrust Funds does not provide legal or tax advice. Content provided relates to taxation at the federal level only. Charitable deductions at the federal level are available only if you itemize deductions.
Rules and regulations regarding tax deductions for charitable giving vary at the state level, and laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of the information provided. As a result, GlobalTrust Funds cannot guarantee that such information is accurate, complete, or timely. Tax laws and regulations are complex and subject to change, and changes in them may have a material impact on pre and/or after-tax results.
GlobalTrust Funds makes no warranties with regard to such information or results obtained by its use. GlobalTrust Funds disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. You are always advised to consult an attorney or tax professional regarding your specific legal or tax situation.