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TAX BENEFITS OF CHARITABLE GIVING TO THE CONGREGATION BETH ISRAEL ENDOWMENT FUND
By Dennis Lavine
A gift to the Beth Israel Endowment Fund can bring not only the personal satisfaction that comes from securing the future of the Congregation, but can be a smart financial move as well. If you itemize deductions on your personal income tax return, you generally can deduct your contributions of money or property that you make to, or for the use of, a qualified charitable organization.
In order to qualify as a legitimate tax deduction, your contribution is subject to certain limitations. For example, the money or property contributed must be made to a qualified organization such as Beth Israel. Your charitable contribution deduction is also limited by your gross income for the taxable year that the donation is made. Your deduction is limited to 50% of your adjusted gross income, but in some cases, 20% or 30% limits may apply.
The timing of making your contributions is also important. You can deduct your contributions only in the year you actually make them. Usually, you are considered having made a contribution at the time of its unconditional delivery. For example, checks that are mailed to a charity are considered delivered on the date you mailed it (not the date cashed); while contributions charged on credit cards are deductible in the year the charge is made.
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If your charitable donation is property, the amount to deduct on your tax return is the fair market value or the cost, whichever is less, at the time of contribution. Generally, the cost is what you paid to acquire the item, sometimes also referred to as its "basis." Fair market value (FMV) is the price at which property would change hands between a willing buyer and seller. Other than contributions of publicly traded stock, the IRS requires that property donations of assets with values over $5,000 must be appraised by qualified appraisers to ensure the assets are not overvalued and to substantiate the deduction. You may decide to donate property that has increased in value from the time you purchased the item, or the FMV is greater than your "basis."
For example, you purchased $8,000 worth of stock and decided five months later to donate the stock to your local synagogue or temple when the FMV of the stock was $10,000. Your charitable donation deduction would be $8,000, the lesser number. However, you would not have to recognize a capital gain on the $2,000 appreciation on your tax return. On the other hand, if you donated that same stock after holding it for more than one year, you have the benefit of using the FMV to determine your deduction of $10,000.
Another factor to consider is what method or vehicle you should use for your gift. Your choice will depend on various factors, such as timing and control over the assets. You may benefit by giving to the Beth Israel Endowment Fund through trusts and retirement accounts.
The favorable tax treatment given to IRA and other qualified retirement benefits has allowed ordinary taxpayers to amass sizable estates. Unfortunately, these tax-benefits are lost at death and can subject an estate and beneficiary to significant taxes. At death, these assets are subject to multiple taxes including federal estate tax, state death tax, and income tax paid by the estate and the heir. This generally causes a large portion of the IRA to be paid out in taxes instead of to the heirs of the estate. A donor may avoid these taxes by contributing the IRA to the Beth Israel Endowment Fund, thus removing it from the estate.
Charitable Lead Trusts (CLT) and Charitable Remainder Trusts (CRT) can also be utilized to obtain charitable donation deductions. In a CLT, you as the grantor give cash or other property to a trust to pay a specified amount to Beth Israel for a certain amount of time (such as your lifetime), with the remainder of the trust either reverting to the grantor or passing to your heirs at the end of the term. The grantor receives an income tax charitable deduction for a portion of the annual contribution.
Similar to a CLT, a CRT allows a donor to contribute assets (such as appreciated stock) to a trust, which in turn sells the assets, but generally will not pay tax on the gains, because it is a tax-exempt entity. The trust will then invest the proceeds and pay you, the donor, income for a fixed term of years (again over the course of a life or lives.) At the end of the term of years, the remainder of the assets are distributed to the Beth Israel Endowment Fund. In addition, the donor receives an income tax charitable deduction at the creation of the trust, based on an actuarial present value of Beth Israel's right to receive the remainder.
With tax deductions Uncle Samuel is encouraging you to help assure that Congregation Beth Israel continues to be a vital center for Jewish life. Secure the future by making a tax deductible donation to our Beth Israel Endowment Fund.
Shalom,
Dennis Lavine
If you are interested in a confidential appointment to explore ways in which you may wish to make an endowment gift, please contact Stuart Simmons, Executive Director, at 858-535-1111 ext. 3113.
Merle Brodie, a member of our congregation and our Endowment Committee, serves as Director of Philanthropy at the Jewish Community Foundation. If you are interested in learning more about tax saving strategies through charitable giving, please call Merle at 858-279-2740.
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