Tax Benefits from Charitable Gifts

Publicly traded securities qualify for a deduction based on the average of the high and low trading prices for the date the stocks were either mailed or received by NC State. For mutual fund shares, the value is usually based on the closing selling price for the date of the gift. Using appreciated assets to make a gift allows the donor to avoid all capital gains tax on the asset transferred (if the property has actually declined in value since purchase, the donor should sell the property so that they may use the capital loss on their own income tax returns). Gifts of real estate, privately held securities or other capital assets having a value of $5,000 or more (the limit is $10,000 for privately held stock) require an appraisal of the fair market value of the asset and an IRS form 8283. These requirements must be met if the donor wishes to qualify for a charitable deduction.

All types of securities, tangible personal property, real estate and other specialized gifts will receive an income tax deduction equal only to the donor’s cost basis. Typically, the cost basis is what the donor actually paid for the asset.

Under IRS rules, gifts in support of athletics may be deductible for only 80% of the value of the gift, unless the donor renounces any points and ticket/parking privileges before the completion of the gift.

Donors will receive a deduction based on the remainder value that will come to NC State or other charities at the conclusion of the life interest of the beneficiaries. The calculation of the deduction is based on the ages of the beneficiaries, the rate of income to be paid, the fair market value of the gift and the federal discount rate in effect for the month the gift is made or either two of the previous months.

Taxpayers are limited as to the amount of charitable deduction that may be used each tax year. The charitable income tax deduction for cash gifts to NC State or other public charities may be used to offset up to 50% of the donor’s adjusted gross income for the year of the gift. This limit also applies to those instances when a donor either chooses or must deduct an asset’s cost basis. For gifts of appreciated property held for more than one year, the deduction may be used to offset up to 30% of the donor’s adjusted gross income for the year. Any excess deduction that may not be utilized in the year in which the gift is made may be carried forward for up to five additional tax years. The donor must use the deduction up as quickly as possible and may not “pick and choose” which years to use it.