By Andrea Rand, executive director of the MOAA Scholarship Fund
Recent changes in tax law have many donors considering non-cash options for philanthropy. Should this be part of your plan, too?
It might be beneficial to donate appreciated assets to avoid the 15-20 percent federal capital gains tax, which applies regardless of itemized deductions. (State capital gains taxes might make this even more beneficial.) Donors who are interested in continuing to receive some benefit from an asset should consider using these appreciated assets to fund a charitable gift annuity. This would provide a significant tax deduction and reduce the capital gains tax burden.
For example, a 72-year-old donor with a security valued at $50,000 with a cost basis of $25,000 could transfer the asset to a charity and receive:
- A $23,256 charitable deduction
- An annual annuity of $2,700. (Of this, $922 is tax-free income, $922 is capital gains income, and $866 is ordinary income.)
- After 14.5 years, the entire annuity becomes ordinary income.
As you can see, this charitable deduction is clearly over the $12,000 threshold for itemizing (for a single filer) and nearly at the $24,000 threshold for married, filing jointly.
For additional information and examples, using other ages and asset values, please contact the MOAA Scholarship Fund office at moaasf@moaa.org or 800-234-6622. It's advisable to review all options with your investment and tax professionals.