If you itemize deductions on your tax return, instead Ghana Email List of taking the standard deduction, donating non-cash assets can help you unlock additional funds for charity in two ways. As we just described, you potentially eliminate the capital gains tax you would incur if you sold the assets yourself and then donated the proceeds, but you could also claim a fair market value charitable deduction for the tax year in which the gift is made and choose to pass on Ghana Email List that savings in the form of more giving. MICHAEL: So, Vonny, one of the things that Julia mentioned in her earlier response was private foundations, which is another type of endowment giving vehicle. Can you briefly explain how these work and when a donor might choose to use a Ghana Email List private foundation as their giving vehicle? VONNY: Sure.
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We’re seeing a move toward the preference for more Ghana Email List control over charitable giving, which can be achieved through the use of a private foundation. And what it is, is a legal entity that’s set up solely for charitable purposes. It differs from a public charity, in that it relies on funding from a single individual, a family, or even a corporation, while public charities rely more on public funding to support their activities. Private foundations are tax-exempt, nonprofit Ghana Email List organizations, and they’ve got to pay out 5% of their endowment each year in the form of grants or other administrative expenses, such as salaries of staff. The IRS will require them to file Ghana Email List an annual form, and it’s made publicly available, and it describes the foundation’s grants, investments, and expenses.
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From the donor’s perspective, you can claim a tax induction Ghana Email List when you transfer assets to a private foundation and it will have a board of directors, typically of three or more people. And in a private foundation, staff can be paid for management and also administrative work. You can set the foundation up to exist across multiple generations, or you can set up the foundations such that all the assets are spent within a lifetime or over some set period of time. The tax benefits of contributing to a private foundation depend on the asset. And, generally speaking, donors who itemize Ghana Email List their deductions get to deduct up to 30% of their adjusted gross income for cash contributions and 20% for appreciated securities, both of which have a five-year carry forward. So, generally, Ghana Email List for publicly-traded assets, the valuation of deduction will be the fair market value.