One of most giving times of year upon us

By Andrew Zashin*

While Giving Tuesday has come and gone, it is still a wonderful time of year to give to charity. There are several ways to contribute this year and a handful of tax provisions that you should be aware of before you do.

As a result of the most recent stimulus package, the Consolidated Appropriations Act, 2021 and handful of significant provisions in the 2020 CARES Act related to charitable contributions were extended through 2021.

One of these noteworthy extensions is the “above-the-line” deduction for charitable contributions.

If you elect to take the standard deduction this year, you can once again deduct up to $300 ($600 for a married couple) from your adjusted gross income if you make a qualified cash contribution to a public charity. By lowering your adjusted gross income, you reduce your taxable income and thereby reduce your federal tax obligation.

If you itemize your deductions, you are once again permitted to deduct financial donations up to 100% of your 2021 adjusted gross income. Accordingly, a taxpayer who itemizes deductions could conceivably donate 100% of their adjusted gross income to public charity and thus owe zero income tax for the year 2021.

Filers who itemize their deductions may also want to consider giving appreciated securities to charity instead of cash this year.

Given the stock market’s solid run, the majority of securities have appreciated over the past 10 years. If you were to sell these appreciated stocks, they would be subject to capital gains taxes. The amount you owe in capital gain taxes depends on whether you’ve owned the shares for more than one year or less than one year and also on your total annual income.

However, if you donate the stock directly to a charity, you can avoid paying capital gain taxes assuming it’s a tax-exempt nonprofit. In other words, the donation allows you to avoid paying taxes on the increased value of the stock and thus reduce your taxable income. As an added bonus, the charity also avoids taxes when they sell the donated investment.

The tax-deduction limit for gifting stock to a public charity is up to 30% of your adjusted gross income, though you can carry any excess over for up to five years.

To donate stock to charity, you’ll first want to find whether the receiving charity has a brokerage account that can accept gifted stock. To obtain this information, contact the charity directly or visit the charity’s website.

People over the age of 70½ have another tool to use when it comes to charitable donations of up to $100,000 per year.

The Tax Act of 2017 made qualified charitable distributions permanent. These distributions do not need to be reported on the taxpayer’s Form 1040. But the money must go directly from the person’s IRA to the charity. This means that the tax payer cannot transfer the distribution to their bank account and subsequently donate cash to the charity.

Most importantly, before you make any financial contribution to a charity this year, make sure you research the organization prior to your commitment. Happy giving.

This article originally appeared as a column for the Cleveland Jewish News.

2023-11-10T13:38:06-05:00December 16th, 2021|Charitable Donations, Deductions, Planned Giving|

Naming rights can make donations more complex

By Andrew Zashin*

This article originally appeared as a column for the Cleveland Jewish News.

Philanthropy happens at all levels of giving. Some donors are comfortable writing checks with one or two zeroes at the end. Others may add a few more zeroes or, perhaps, sponsor a table at a gala or donate a valuable item. But the pinnacle of philanthropic giving involves naming rights.

Who isn’t familiar with Carnegie Hall or Rockefeller Center? Cleveland’s local universities are filled with buildings named for donors. Naming rights can be very useful for a nonprofit institution. After all they are very expensive, and naming rights can encourage major donations. A wing, hall, or building becomes part of the local landscape, and the name lives on beyond the person. There is something very appealing about leaving a lasting legacy, and the right to do that can encourage the sort of major donation that can help an organization meet its philanthropic goals.

Large anonymous gifts get publicity. Each December, for example, we hear news blurbs about generous but anonymous donations into Salvation Army buckets. But publicity surrounding large public donations tends to be much more beneficial for the organization overall, attracting more attention and often more donations from other large donors.

But naming rights require a delicate balance between satisfying the donor’s (or donor’s heirs’) wishes for the name to live on and the need to attract future large donations by having the latitude to bestow further naming rights. After all, the things that get named require upkeep. Maybe a wealthy donor provided needed funds for a facility overhaul and negotiates naming rights as a condition of the gift. What then happens when the next overhaul is required? Do those same naming rights get bestowed on the next donor?

There are differing schools of thought surrounding the “best” way to manage these types of issues. Many donors and organizations believe that revolving naming rights are the best way to further the organization’s mission, by enticing new donations. On the other hand, many large endowments have fallen through when an organization refused to honor certain naming demands. And sometimes rights that were to be in perpetuity are bought out or otherwise terminated in some way in order to meet future goals.

For tax purposes, the Internal Revenue Service has long taken the position that public recognition does not count as a measurable benefit that would impact any tax deduction. So, a $20 million gift has the same tax benefit irrespective of whether or not the donor gets a new museum wing named after him in perpetuity, for a limited period of time, or not at all.

Ultimately, significant consideration and negotiation goes into giving at this level, both from the standpoint of the donor, as well as the nonprofit organization, and lengthy legal contracts must be drafted to carefully spell out the terms of the naming rights and the contingencies surrounding the donation.

Here’s a primer for planned giving

By Andrew Zashin*

This article originally appeared as a column for the Cleveland Jewish News.

You may have heard the term “planned giving” before. Maybe you encountered it in fundraising materials for your favorite charity. Perhaps your estate lawyer or financial planner suggested it as an option for you, or you may have heard about it from a friend or colleague who has made planned gifts.

Simply put, planned giving is a gift that is planned, that has more forethought than a simple cash donation to a cause. It can involve a future gift, such as one that is given upon your death, usually by will. It can involve an annuity that pays an income over time. Or it can involve some sort of appreciated asset that is a substitute for cash.

Ultimately, you should consult with your legal and financial advisers to determine what option is best for you and your situation. However, a little education is most assuredly useful and will go a long way toward helping you figure out how best to proceed.

Know that if you are considering donation of an asset, a bequeath via a last will and testament is a very common method. In that way, once your will is probated, the recipient of your choice will receive the asset you specified, potentially including things like securities, business interests, real property, or personal property (a significant piece of artwork, for example). Or, perhaps, you might opt to name your selected recipient as your beneficiary on an asset that is not divided by the probate process, such as a life insurance policy or a retirement account. Any of these options might be right for you if you own a significant asset from which your selected recipient can benefit, even if you do not have the cash immediately on hand.

Of course, instead of waiting, you may opt to immediately gift an asset that uses the asset’s appreciation as a substitute for cash – and generally buys the gift giver tax benefits in the process. For example, by gifting stock, the gifting party can not only avoid capital gains on the stock’s appreciation, but also take a tax write-off for the gift. Other types of assets, such as jewelry, books, and artwork, can be donated with a tax deduction taken for the fair market value, which may be more than the price paid. And the tax code explicitly permits individuals who have reached the age of 70½ to donate up to $100,000 in IRA monies to charitable causes without the distribution being considered as taxable income.

Finally, it is possible to make a cash gift in the form of an annuity that returns income or other financial benefits to the donor in return for the contribution. These can take multiple forms under the United States tax code, but generally speaking, a sum of money will be placed in a trust that benefits both the charitable organization and the donor on a long-term basis. As one example, a charitable gift annuity creates a contract between a donor and a charity whereby the donor transfers cash or property to the charity in exchange for a partial tax deduction and a lifetime stream of annual income from the charity.

The bottom line is that, if planned giving is for you, there are a number of options depending on the nature of the gift you wish to make. Speak with your legal counsel and financial adviser and you will be sure to find the option that works best for your specific circumstances.

*Andrew Zashin writes about law for the Cleveland Jewish News. He is a co-managing partner with Zashin & Rich, with offices in Cleveland and Columbus.

2023-11-10T13:38:15-05:00March 19th, 2015|Charitable Donations, Planned Giving|

Planning can help maximize charitable giving

By Andrew Zashin*

This article originally appeared as a column for the Cleveland Jewish News.

Frequently, charitable donations are made as isolated, one-time events. Perhaps you are checking out at a store and opt to make a small cash donation to whichever organization is sponsored there. Or maybe you’ve left a bag of clothing or household goods on your front porch for a scheduled pickup. Maybe you donate annually to your alma mater, to your synagogue/ shul/temple, to an organization dedicated to finding a cure for a specific ailment, to a particular Jewish foundation, a homeless shelter, or an animal shelter where you adopted a beloved furry friend. Whatever your preferred cause, if your charitable donations are more than sporadic you should consider the financial benefits of planned giving.

When people think of “planned giving” they often think of a bequest made in a will or trust. Such bequests are quite common and may be used for all sorts of purposes, including the transfer of lump sums of money, of other types of assets, or of real property. Often, these gifts will be established as a trust for a particular purpose, such as a scholarship fund for deserving students, or a facility to house the operations of a particular nonprofit.

Certainly, a primary reason to create such a will or trust provision is simply to share your wealth with a personally meaningful cause. But there are further financial benefits to such a bequest. Certain donation vehicles, such as charitable gift annuities, can actually provide annual income to the donor even while providing a charitable gift tax deduction. And, with some careful deliberation and a good estate-planning attorney, you can determine which assets or funds are best to donate, and which are most favorable to leave for your heirs, to minimize their tax impact upon the passing of your estate.

But planned giving is actually much broader than just wills and trusts. Planned giving really refers to any charitable giving that involves a bit more forethought than a spur-of-the-moment Harvest for Hunger donation made at the grocery store.

The planning aspect of this type of giving is quite important – with a little forethought, it is possible to give a charitable gift in such a way it not only benefits the organization, but you as well.

Generally speaking, a gift of money or other valuable property either directly to or for the use of a qualified organization is going to be tax-deductible. The donated property might be clothing, household goods, jewelry, paintings, antiques, and other art objects, collections of things like stamps, coins, books, vehicles, including cars, boats, and aircraft. The deduction will typically be the fair market value of the asset at the time of the gift.

And did you know that capital gains tax wouldn’t be assessed on an appreciated asset that is donated?

All in all, most individuals like to donate. It feels good to help out. But with a little planning, you can donate in a way that benefits not only your cause of choice but also you.

*Andrew Zashin writes about law for the Cleveland Jewish News. He is a co-managing partner with Zashin & Rich, with offices in Cleveland and Columbus.

Go to Top