Timing of charitable donations

When engaged in estate tax planning and considering charitable contributions, donors should keep in mind that the type of gift given and the timing of the donation may affect its tax status.

Those planning to give charitable gifts while they are alive may find that the best choice is to use publicly traded securities or real estate. As long as the assets have been owned for at least a year, the full market value is deductible by any taxpayer who itemizes deductions. Neither the donor nor the charity has to pay taxes on the appreciation of these assets.

When giving contributions worth more than $250, the donor will need documentation from the receiving organization to verify the amount given. If the contribution is money, whether cash, a check or in another fashion, then a written acknowledgement from the organization or a bank record will be necessary.

Attorney Carissa Giebel notes that giving retirement assets while alive may not be the best choice, however. They are considered a distribution and subject to income taxes under those circumstances. For those who wish to leave a gift to a charity after they die, however, the situation is different.

While leaving retirement assets to most beneficiaries leaves them subject to taxation, giving them to a charity avoids both the income and estate taxes. Nonretirement assets, on the other hand, may not be subject to the capital gains tax when left to individual beneficiaries.