Since donations to Interfaith Alliance Foundation, a 501(c)(3) organization, are tax-deductible, many of our donors prefer to give their largest gift at the end of the year, shortly before they do their taxes. For some people, that just means writing a larger check than usual by December 31st in order to include it with that year’s tax return. For others, they like to make year-end gifts in honor or in memory of a relative or loved one. But those aren’t your only options, especially if you’re looking to make a fairly large donation. Some other popular year-end gift ideas are:
- Gifts of stock. If you’ve owned a certain amount of stock for more than a year, donating it can be a smart way to maximize your tax deductions – and a great way to give! By donating stock you’ve owned for a “long-term” period of time (usually more than one year), you both receive an income tax deduction for the fair market value of the stock on the date you donate it and avoid paying a capital gains tax on the stock’s increase in value since the time you bought it. You can donate up to 30% of your adjusted gross income in gifts of stock each year.
- Gifts of life insurance. If you hold a life insurance policy that you no longer need, it can be a great way to make a year-end gift. By naming Interfaith Alliance as both the policy’s owner and beneficiary, you can take a charitable deduction that is roughly equal to the policy’s cash value at the time the gift is made. And if you continue to pay annual premiums, they’re tax-deductible each year. Ask your life insurance agent for information on which forms to complete.
- Gifts of real estate. If you own a piece of real estate that has significantly appreciated in value over the years, donating it can help you avoid a sizeable capital gains tax. And, of course, you can take a charitable deduction for the property’s full fair market value.
- Life income gifts. This type of gift is a long-term commitment, but can be very rewarding. A trust is created with the assets you choose to donate, and you receive a certain amount of the trust’s annual return – usually more than what you would have received in interest or dividends if you retained the assets under your own name. You’re also entitled to a charitable deduction, the amount of which varies depending on the size of the trust, the specified annual return, your age and various other factors. With a charitable remainder unitrust, you receive a set percentage each year (for instance, a 6.5% return on a trust comprised of stock that would otherwise only have seen a 2% dividend each year). With a charitable remainder annuity trust, you receive a set amount each year. With either type of trust, you increase both your annual income and charitable deductions.
With any of these options, the best place to start is with your financial advisor – they’ll be able to get you started, then you can contact us at email@example.com to take the next step.