If you itemize deductions on your tax returns, the first tangible benefit of making a gift of cash to Colorado State University today is an income tax charitable deduction for the full value of the gift in most cases. The resulting reduction in income taxes payable lowers the net cost of the gift. If you are subject to state and/or local income taxes as well as federal, the combined marginal rate (after the federal deduction for those income taxes paid) should be taken into consideration in determining the gift's net cost.
If you don't usually itemize deductions, you may want to consider it for any tax year in which you make a sizable charitable donation. One technique used by people who have few itemized deductions is to alternate between years in which they take the standard deduction and make few charitable gifts, and the years in which they give double their usual annual philanthropic support and shift to itemizing.
Beware of the annual limitation on the use of charitable deductions claimed for gifts to public charitable organizations, which for any specific year is 50 percent of your adjusted gross income (AGI) for cash gifts. Any unused deductible amounts can be carried over and used for up to five additional years, if necessary.
If you predict that your estate will be subject to estate tax at your death, keep in mind that you receive a federal gift tax charitable deduction for the value of gifts of cash made during your lifetime. Since the value also is removed from the value of your future estate, it completely eliminates the federal estate tax. This savings reduces the net cost of your charitable gifts. Note that currently federal estate taxes are repealed for the year 2010, but Congress has several bills under consideration to reinstate federal estate taxes for anyone who dies in the year 2010 and beyond. What the final legislation will look like is unknown at this point. Check back later for future updates.
Outright Gifts and Their Results
Cash gift. A gift by check is one of the most common methods for making an outright charitable contribution. For gifts by check of $250 and more, donors must have written confirmation from the charitable donee, as canceled checks are no longer sufficient proof of a deductible gift at this level. Canceled checks are acceptable for checks of less than $250. True cash gifts (not checks), regardless of the amount, must be evidenced by a receipt from the charitable organization.
To illustrate the net cost of a $1,000 cash gift, assume the gift is made by a taxpayer with a combined state and federal marginal income tax rate of 36 percent. The amount of the tax bracket, multiplied by the amount of the gift, is subtracted from the gift to determine the net cost to the donor.
36% x $1,000 = $360
$1,000 - $360 = $640
Therefore, the net cost of the donor's gift is $640.
Please contact Marianne Blackwell at (970) 491-7862 (866) CSU-GIVE, or via e-mail at mblackwell@ua.colostate.edu, for more information.
The information in this Web site is not intended as legal advice. For legal advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to income tax apply to federal taxes only. Federal estate tax, state income/estate taxes or state law may impact your results.
Gary Ozzello's 30 year association with Colorado State University has impacted his life so profoundly he took steps to ensure he repaid the favor. Gary knew he wanted to make a substantial gift to the University but not having the immediate capability to do so prompted some creative thinking...
