WAYS TO DONATE AND TAX DEDUCTIONS

In this Posting, we are addressing the Top 10 Ways and Types of Donations allowed under the IRS Charitable Giving Rule and Regulations. Donating and giving have always been interpreted as Giving Money and or volunteering for Charitable Organizations Social Programs and events. However, there are many ways, methods, and types of Items allowed to donate to your favorite Charities.

TYPES OF CHARITABLE ORGANIZATIONS

The three types of charitable Organizations are:    

Public: Dependent on Donations from the public and corporations

Private: Primarily Funded by Founders Donations i.e., Bill Gates Foundation, Bezos’s Family Foundation,  Hewlett Packard Foundation, Rockefeller Foundation, etc., 

Institutional: Education, and Research:  United Nations i.e. Harvard University, UN Women, UNICEF, etc.

The Paz Foundation is a Privately Held Nonprofit Foundation

The Paz Foundation is a Private Foundation mostly funded by the Founder’s Assets according to IRS Rules, a Private Foundation is described as follows:

“A private foundation cannot be tax exempt nor will contributions to it be deductible as charitable contributions unless its governing instrument contains special provisions in addition to those that apply to all organizations described in 501(c)(3). See Publication 557, Tax-Exempt Status for Your OrganizationPDF, for examples of these provisions.  In most cases, this requirement may be satisfied by reference to state law.  The IRS has published a list of states with this type of law”. 

We welcome your Donations to the Paz Foundation via PayPal, Debit, Credit Cards, ACH, or any of the ways to give as described in the following Blog.  

WAYS TO DONATE

PAYPAL:  This platform is being used around the world to transfer and Donate Money to Charitable Organizations and  GoMe funding 

INSURANCE CASH VALUE: Accumulated Cash Value for a Policy, Insurance Death Benefits, Annuities     

ANNUITIES: Annuities are Tax Exempt Cash Policies that earn Yields either fixed or from indexed Investment Funds

VEHICLES: People can donate Vehicles such as cars, Boats, and Airplanes to charities and receive tax exemptions  

ARTWORKS: People and Corporations can donate Valuable Artworks with authenticated valuations

STOCKS AND BONDS: Personal or Corporate stocks and bonds can be donated to Charitable Organizations

GOLD AND JEWELRY: Gold and precious metals including valuable coins can be donated and the appraised value deducted from taxes

REAL ESTATE: Homes, land, and assets under a Family or Corporate Trust can be donated the nonprofit Organizations

COLLECTIBLES: Rare Collectibles can be donated to nonprofits

CORPORATE DONATIONS: Corporations can match donation funds from employees’ Payroll or they can donate large sums to nonprofits and receive tax exemptions

LOTTERY EARNINGS: Donors can donate Lottery earnings or gifts to nonprofits  

Description and general rules of the types of Donations:

Cash donation:  

Charities love cash because it’s easy to assign value and can be put to immediate use. Plus, it’s the most straightforward way to donate. For taxpayers who don’t use itemized deductions, only a few hundred dollars worth of cash donations can be deducted.  

Itemizing usually does make sense for higher-income individuals and families who have large deductions, such as state and local taxes and mortgage interest in addition to charitable donations. Under the CARES act, a taxpayer could deduct cash contributions equaling up to 100 percent of their adjusted gross income. However, that ship sailed in 2021. Unless Congress changes the tax law again, the limit on the deductibility of cash donations is 60 percent of AGI.  

If the donation exceeds 60 percent, it should still be reported because it can be carried over for five years. Typically, the deduction equals the amount of the gift, less the value of any goods or services received. Checks and credit cards are the best way to make cash contributions because there’s a record. In any case, retain letters and receipts documenting cash contributions.  

Stocks and securities  

Let’s say someone wants to donate $100,000 to their local food bank. Should they sell stock and donate the proceeds, or donate the stock itself? Depending on the tax bracket and whether the stock in question is a long-term holding that has been appreciated, donating stock could generate a greater tax benefit than selling it and making a cash contribution. The reason? Capital gains!  

When an appreciated asset is sold, the owner is on the hook for 20 percent in long-term capital gains tax and 3.8 percent net investment income tax. There may also be state and local taxes. If the stock is given directly to a charity, though, the charitable deduction remains the same. Also, the donor avoids the capital gains tax. The brokerage must be informed that the stock is being transferred “in kind.”  

This type of income tax deduction is limited to 30 percent of AGI. Again, if the entire deduction can’t be taken in a given tax year, it can be carried over for up to five more years.  

For stocks that have decreased in value, only the fair market value can be deducted. In this case, the donor might be better off selling the stock and taking the capital loss, then giving the proceeds to charity. Before making such a decision, it’s a good idea to consult with a tax expert or investment advisor.  

Personal Property and Inventory  

A great many rules apply to contributions of personal property. Generally, the amount of the contribution is the fair market value of the property being donated. If it’s $500 or more, there’s a special IRS form. Donations can’t exceed 30 percent of AGI but can be carried forward.  

If donated tangible assets like vehicles, artwork, and jewelry are valued at over $5,000, the IRS requires a written appraisal. If the charity sells the item, the sale price is the deduction.  

Regular C Corporations can donate excess inventory in-kind to qualified nonprofits and receive very favorable tax treatment. Deductions are equal to the cost of the inventory donated, plus half the difference between the cost and selling price, not to exceed twice the cost.  

Real estate  

Transferring the deed or title to a charity is the simplest way to donate real estate. The size of the deduction usually depends on whether the real estate is a short-term asset (held one year or less) or a long-term asset (held more than one year).  

Short-term. The deduction is equal to the lesser of the property’s fair market value or its cost basis. This limitation applies to all donations to private foundations, even if the donated assets have been held long-term.  

Long-term. The deduction is equal to the fair market value of the property. The deduction is generally limited to 30 percent of the donor’s AGI.   

Written by,

Luis Ortiz Aguilar Sr.