Tax Benefits
Save taxes in four ways
- Contributions are tax deductible in the year they are made. Because HCF is a public charity, contributions qualify for immediate and maximum tax benefits.
- Deduction for cash: Up to 50% of adjusted gross income (AGI).
- Deduction for securities and other appreciated assets: Up to 30% of AGI.
- Five year carry forward of unused deductions.
- Avoid capital gains on gifts of appreciated property.
- Avoid estate taxes.
- Investments in a Donor Advised Fund can grow tax free.
Other tax considerations
When contributing the following asset types to HCF, donors can deduct the full market value of the asset subject to the AGI limitations mentioned above. If contributed to private foundations, the donor's deduction would likely be limited to cost basis.
- Closely held stock (C-corp or S-corp).
- Real estate.
Note: The information provided herein is for informational purposes only and should not be interpreted to constitute legal and/or tax advice. Donors should consult their legal and tax advisors regarding their specific situations.
Comparison: Private Foundation with HCF's Donor Advised Fund
| |
Private Foundation |
HCF’s Donor Advised Fund |
| Valuation for charitable deduction: closely held stock or real estate |
Cost Basis |
Fair Market Value |
| Valuation of publicly traded securities Fair Market Value Fair Market Value |
|
|
| Income tax deduction - percentage of AGI, with 5 year carry over |
30% for cash, 20% for appreciated assets |
50% for cash, 30% for appreciated assets |
| Excise tax on investment income |
1-2% of income |
No excise tax |
| Set up expense |
Costly |
No set-up fees |
| IRS approval process |
Time consuming |
A Fund can be established in less than a day |
| Annual distribution requirement |
5% |
None |
| Investment options |
Wide range |
Wide range |
| Preparation of tax returns, IRS compliance, accounting, grants management, fiduciary oversight, legal and audit |
Donor must arrange for these services |
Provided by AEF |
| Confidentiality |
*None - All information is publicly available via form 990-PF |
Donor has flexible options: Full recognition, or partial, or full anonymity |
*Private foundations provide little confidentiality. With the advent of the Internet, information is more available than ever. Today, anyone with a computer can access Guidestar (www.guidestar.org) to gain information on any private foundation, including a scanned version of its 990-PF. Available information includes balance sheet detail (including investment holdings, a listing of directors (including contact information), every grant that is made (organization name and amount), and detail of administrative and investment management expenses.
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