Smart gift planning combines charitable intent with cost-efficient planning techniques. Of critical importance is the kind of asset used to fund the gift. Usually, long-term appreciated property can generate the most favorable tax benefits. Reason: Gifts of such property provide a double benefit—a charitable deduction, in most cases, for the full fair-market value of the property—plus avoidance of any potential capital-gain tax.
The chart below illustrates the additional tax savings from a gift of appreciated assets.
Cash
Appreciated Property
A.
Fair-Market Value
$10,000
$10,000
B.
Cost Basis
10,000
4,000
C.
Capital Gain
0
6,000
D.
Capital-Gain Tax (15%)
0
900
E.
Charitable Deduction
10,000
10,000
F.
Actual Tax Savings* (24%)
2,400
2,400
G.
Total Tax Savings (D+F)
2,400
3,300
*The exact amount that can be claimed as a charitable deduction depends on two factors: the total amount of charitable gifts a donor makes in a given tax year (including the deduction described here) and the donor’s adjusted gross income.