As the year draws to a close, Jerry Langley and millions of other Americans are remembering it’s better to give than to receive - especially when the gift is tax-deductible.
Langley, a vice president for McDonald’s Corp. in Illinois, helps soften the tax bite on his investments by donating shares of stock to selected charities. In a classic win-win scenario, the charities get the stock and Langley gets out of paying the capital gains tax on the shares he contributes.
“I think there has been an increase in the desire of owners to give more stock gifts,” said Mary Kay Phelps, acting vice president for development at the American Red Cross. Although the group has educated philanthropists about the option for nearly five years, “donors have been paying more attention to it lately.”
Other donations are on the upswing as well. Cars and real estate are popular gifts, but cash is still king. Last year, for instance, contributions to the Red Cross were up 120 percent over the previous year and the United Way noted a 17 percent growth in gifts of more than $1,000.
Experts say the trend should continue, as baby boomers consider the best way to hand down their inheritances.
“Many estates have swollen with stock values rising,” said David G. Phillips, president of Custom Development Solutions, a South Carolina fund-raising consulting company that specializes in capital campaigns over $1 million. “With that much more equity floating around, it’s that much easier for talented organizations to represent their causes.”
Some charities accept cars, boats and other items directly from donors, who can take a tax deduction for the fair market value of the object. Other charities use companies like Charity Donations Programs of Rancho Cordova, Calif., to receive and sell the items for them.
Taron Reeves, who owns the company, said he thinks many donations are made as much to get rid of an unneeded item as for the tax break.
“It’s a convenience thing, like donating old clothes,” he said.
Eric Hargis, executive vice president for the National Arthritis Foundation, also said tax considerations are a secondary factor when people make donations to charity.
“For individuals looking purely to shelter their income, they probably can find a better way to do that,” he noted.