The Internal Revenue Service (IRS) grants maximum tax advantages to community foundations because of their widespread public support, their emphasis on community betterment and their charitable status. Gifts to community foundations permit full charitable deductions for donors. Gifts of appreciated assets, such as stocks or property provide distinct tax benefits.
- You may take the maximum tax deduction allowed by law in the year a gift is made or carry the deduction forward over the next five years, as necessary
- You gain a higher deduction for giving cash: up to 50% of your adjusted Gross Adjusted Income (AGI) (compared to 30% for gifts to a private foundation)
- You gain a higher deduction for giving appreciated securities: up to 30% of AGI (compared to 20% for gifts to a private foundation)
- You gain a fair market value deduction for other appreciated property (e.g. real estate) compared to only the cost basis for gifts to a private foundation.
Advantages Over Private Foundations
- You pay no start–up costs, compared to legal and filing fees to create a private foundation
- The IRS does not require community foundations to pay out a minimum percentage of its endowment compared to the 5% distribution requirement for a private or family foundation
- You pay no excise tax compared to the 2% excise tax for a private or family foundation You avoid the costly expense to have annual tax returns and other IRS filings prepared a private or family foundation
- You avoid the complicated self-dealing and conflict of interest regulations that are imposed on private and family foundations
Contact us or consult your tax advisor for more details.