Gary Rolfes Clinton, IA Attorney

Congress designed tax laws to encourage people to support local and national activities through charitable giving. “Through charitable contributions and tax-deductions, Congress thinks it is great if people, businesses, and organizations support ‘quality of life’ community helping to spearhead the local drive to support the Mississippi River Eco Tourism Center. Taxpayers who itemize their deductions can reduce their taxes by making charitable gifts. Gifts to non-profit 501c3 organizations, like the Clinton County Conservation Foundation, are deductible to the full extent of the law. The size of the Mississippi River Eco Tourism Center campaign will require people to think about larger gifts than ever before. People will be asked to consider four, five, and even six-figure gifts. When people are considering gifts of that size, it is especially important to let the government pick up part of the cost of the gift through tax deductions. “The easiest way to support this project is just writing a check, but that may not be the best way from a tax standpoint”, says Clinton, Iowa attorney, Gary Rolfes, who spends a lot of his time counseling clients on tax matters. Mr. Rolfes states that a gift of appreciated assets makes a lot of sense for some individuals. “Some folks are reluctant to sell long-held assets which have appreciated in value so as not to trigger a capital gains tax that could, between Federal and State taxes, eat up as much as one third of the profits. Whereas, if the assets, such as shares of stock, are donated to the charity, the donor not only can claim a charitable deduction for the full value of the gift, but at the same time the donor avoids the potential capital gains tax that would be owed if the asset were simply sold.”

The rules governing charitable deductions are a little different for cash donations versus gifts of appreciated property, explained Rolfes.  “Cash contribution deductions are limited to 50% of one’s adjusted gross income in any given year, while gifts of appreciated property are limited to 30% of Adjusted Gross Income.  Even so, charitable contributions in excess of these percentages can be carried over and used in the ensuing five years.”
Mr. Rolfes also gives a few cautions governing gifts of appreciated assets.  He explains that to maximize the tax benefits of donating an appreciated asset, it must be held for at least one year.  For instance, a gift of appreciated stock that one has held for only a few months will generate a charitable deduction equal to the cost of the asset, not its value.  Rolfes also recommends against donating stock that has depreciated in value, advising instead to sell the investment and give the proceeds to charity.  He says, “By selling the investment first, the investor will get a capital loss deduction plus a deduction for the cash contribution.”
People who are considering structuring their gifts in a tax-wise manner should consult with their tax professionals.  Everyone’s situation is different, and individuals need to talk to someone who knows his/her situation and how the laws will apply to them.