Donating property to charity can be a good way for you to help the less fortunate while you cut your own tax bill. Be aware of the advantages and disadvantages of donating property to charity.
Here are some suggestions if you're planning to donate property.
If the property has declined in value since you bought it, sell the property and donate the cash to charity. You may get both a deduction for the contribution and a tax loss on the sale of the asset. If you donate the property directly to a charity, you will not be allowed a loss on the disposition. For example, if you sell stock for $4,000 that cost you $7,000, and then donate the $4,000 to charity. You will be allowed a $4,000 charitable deduction, and you are also entitled to a $3,000 loss on the sale of the stock.
On the other hand, if you have stock that has appreciated in value, you may want to donate the stock before it is sold. Let's say you bought stock two years ago for $7,000 and today it is worth $9,000. If you donate the stock to charity, you will have a charitable deduction for the full $9,000, but you will not be required to pay taxes on the $2,000 gain.
As with all tax planning, there are many factors to consider when donating various types of property. Please contact us before you undertake any sizable transaction.
Steven C. Leibold, EA
San Diego Business Advisors