The Choice of What to Give
Cash: A Popular Gift
 Charitable gifts are most often made in the form of cash and checks. Cash
gifts are convenient for many people and are easily recorded through canceled
checks and receipts. Remember that it is important to save all receipts to
assure maximum tax savings.
Non-Cash Gifts: Enjoy
More Savings
Donors often choose to make their gifts in forms other than cash. Examples
include:
- Securities (stocks, bonds,
mutual funds)
- Real estate
- Retirement plans
- Life insurance policies
- Other items of value (jewelry, paintings, collections, antiques, etc.)
After considering the properties you own, you may find giving something
other than cash to be an appealing alternative. Giving non-cash property
enables you to make a meaningful gift 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 (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
appreciated property lets you bypass capital gain tax that could be due if
you sold the asset. You are also entitled to a charitable deduction based on
the property’s current value, including the “paper profits” you have earned
since you have owned it.
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For example: Barbara is in a high federal income tax bracket. She wants to make a $5,000 gift for charitable purposes. Should she give stocks, bonds, or mutual funds worth that amount, or should she 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 $1,750 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 $1,750 in taxes (just like a cash gift), plus
- Avoidance of capital gains tax on the $4,000 increase in value, a $600 savings (15% capital gain tax rate x $4,000)
All told, the after-tax cost of Barbara's gift of stock worth $5,000 is just $2,650. Comparing that to the $3,250 after-tax cost of giving cash, she decides to give the stock and thus make the same gift to the charity at a savings of almost 20% over the after-tax cost of the same gift in the form of cash.
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Giving Depreciated Property
If you have stock or other property that has decreased in value, you will
normally save more in taxes by selling them and giving the proceeds. You may
then 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.
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