THE CHOICE OF WHAT TO GIVE 

Cash: A Traditional Favorite

The Hope Christian Community Foundation (HCCF) most commonly receives cash gifts in the form of checks. Cash gifts are convenient for many people and are easily recorded through canceled checks and receipts. It is important to save all receipts to assure maximum tax savings.

Non-cash Gifts: Surprising Savings

Donors to HCCF frequently make gifts in forms other than cash. Examples include:

• Securities (stocks, bonds, mutual funds)
• Real estate
• Insurance policies
• Retirement plans
• Stock options
• Other items of value (jewelry, paintings, collections, antiques, automobiles, etc.)

After considering all that you own, you may find giving property other than cash to be an appealing alternative. Giving non-cash property enables you to help ministries and other organizations while conserving cash for other uses and enjoying what may be greater tax savings than those provided by gifts of cash.

Giving Appreciated Property

If you have non-cash property, such as stocks and mutual funds, that has grown in value (appreciated) and been held long-term (currently more than one year), you can generally enjoy greater tax savings from giving such property than from giving an equivalent amount of cash. That’s because a gift of long-term appreciated property does not generate capital gains tax, which you may owe if you sold the property. You also receive a charitable deduction for the property’s current value, including the amount of any increase since you have owned it

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Giving Depreciated Property

If you have stocks or other properties that have decreased in value, you will normally benefit more by selling them and giving the proceeds. You may be able to claim a capital loss on your tax return. You can also deduct the cash proceeds you give as a charitable gift. The result can be to enjoy tax deductions that amount to more than the current value of the asset.

For example: Lisa Jones is in the 39.6% federal income tax bracket. She wants to open a donor advised fund with $5,000. Should she give stocks, bonds, or mutual funds worth that amount, or sell them and give the cash from the sale?

If she gives $5,000 cash, she’ll receive a deduction for $5,000, saving her $1,980 in taxes. If she gives stock valued at $5,000 that was purchased years ago for $1,000, she will achieve the following results:

A charitable income tax deduction for $5,000, saving her $1,980 in taxes (just like a cash gift), plus avoidance of capital gains tax on the $4,000 increase in value–an $800 savings (20% capital gains tax rate x $4,000).

All told, Lisa’s gift of stock “costs” her just $2,220. Comparing that to her $3,020 “cost” of giving cash, she decides to give the stock and thus give the same amount to a donor advised fund at a savings of over 26% of the after-tax cost of a gift of cash.

With these possibilities in mind, read on to learn about a variety of gift plans that allow you to give more while helping to preserve your economic well-being.