The Nonprofit FAQ

What are the various tax benefits available to a donor?

The income tax, capital gain tax, gift tax, and federal estate tax consequences will depend upon the source and subject matter of the gift, the nature of the nonprofit donee, and also upon the form of the gift (i.e. outright, Charitable Lead Annuity Trust, Charitable Remainder Annuity, Charitable Remainder Unitrust, Irrevocable Life Insurance Trust). In most cases, of course, only donors who itemize deductions on Schedule A when filing their annual personal income tax returns (1040s) will see any tax benefit linked to a specific gift; the "standard deduction" allowed for taxpayers who do not itemize on schedule A includes an allowance for typical levels of charitable giving. When large gifts are made, though, any properly structured form of gift is likely to generate tax benefits for the donor; one should be sure that the donor will consult with competent tax counsel as to the actual benefit to the donor or to his or her estate from various forms of suggested gift transaction. These transactions can be quite complex, and competent tax counsel should be used and counsel may also find a different, more beneficial approach. It should also be noted that the tax ramifications and savings available through planned giving are often considered for change in Congress. Luke Davis asked on Jan 19, 2002, in GIFTPLAN (a forum at CharityChannel.com): Are there any known good web resources on Irrevocable Charitable Trusts, and the laws respecting them, the reporting requirements, operations thereof, etc., or any good articles about their workings, from the inside, not necessarily from the prospective of some charity or author, with an agenda in some direction? Vaughn W. Henry, of Springfield, IL, offered these references: Everyone has an agenda, don't kid yourself. However, I can suggest that the Planned Giving Design Center does have a section with documents posted on line for professional advisors to review that are much better than the IRS prototype documents (www.pgdc.net [No longer operating 1/23/10; http://www.pppnet.org/resource/resource.html">The Partnership for Philanthropic Planning offers some resources online &mdashEd.]). My site (http://www.gift-estate.com) has a bunch of information that's free to charities, but personal handholding is not free. However, I do offer a free calculator on my site that will do lead and remainder trusts, pooled income funds, gift annuities, life estates, etc., which is available for those interested in doing such calculations. For professional advisors, there's a more detailed link that generates the calculations needed for the IRS and compliance. J. David Kerr suggested: Consider joining RIA Checkpoint (a fee-based online reference service) from http://www.riahome.com/. Substantially revised 1/20/02 -- PB