Tax-smart ways to give to charity

Giving to a cause you support can be an enriching experience. However, you want to make sure you make your contributions in a tax-smart way. Here's a brief look at ways you can make the most of your charitable giving.

Giving Cash
Generally, you can deduct cash contributions to a qualified charity up to 50% of your adjusted gross income for the year. However, you can't deduct a cash contribution unless you keep a bank record, a receipt, or payroll deduction records that state the name of the charity and the date and the amount of the contribution. For cash gifts greater than $250, you will need a written acknowledgment from the charity to substantiate your charitable deduction.

Donating Appreciated Securities
Many individuals sell securities that have risen in value and then give the sale proceeds to a charity. However, if you sell appreciated securities, the capital gains could result in a significant tax liability. From a tax viewpoint, it's typically better to donate the securities directly to the charity. That way, you avoid realizing a capital gain and will enjoy a deduction for the stock's full market value, provided you held the shares for more than a year.

If you really like a certain stock and believe it still has potential for additional appreciation, you could donate your shares and eliminate the capital gains exposure and then buy them again at their market price. This strategy would give you a cost basis in the stock equal to the current value and still allow you the chance to enjoy future appreciation.

Establishing a Trust
If you donate assets through a charitable remainder trust, you can continue to benefit from the gifted assets. A charitable remainder trust allows you to give assets to a trust for the charity of your choice and still retain cash flow from those assets during your lifetime. You simply transfer property to the trust. The trust then pays you, your spouse, or whomever you've selected as beneficiary distributions for life or for a set period. When the trust terminates, the assets remaining in the trust are transferred to the named charity.

While the charity does not receive your gift until the trust expires, you can claim a federal income-tax deduction for your contribution in the tax year you fund the trust. The deductible amount is the present value of your ultimate contribution to the charity.

These are just some of the tax-saving strategies that may be involved in charitable giving. Your Fifth Third Private Bank advisor can help you determine if any of these strategies are right for you.

Fifth Third does not provide tax or legal advice. Consult with your tax adviser or attorney for advice pertinent to you personal situation.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.