Making a Difference: Choosing Cash vs. Property Donations

Making a Difference: Choosing Cash vs. Property Donations

May 08, 2024

You have your favorite charities, and you never hesitate to give each year. But have you considered the impact of cash vs. property donations to your pet causes? No matter which way you go, donations enable you to make a difference in your community and lower your taxable income. That said, a property donation could have an even greater impact on your favorite charity and the taxes you pay. Unfortunately, too few people are aware of the prospective benefits of property donations.

The question of cash vs. property donations hinges on variables like:

  • The type of asset you want to donate
  • The impact your donation has on your taxes
  • The assets a charity can accept

Consulting a wealth advisor at Anderson Financial Strategies can help you understand cash vs. property donations to optimize your charitable giving and tax planning.

A Closer Look at Cash vs. Property Donations

You might automatically reach for your wallet or checkbook to give to causes you hold dear, knowing you can deduct the donation on your tax return to potentially lower your taxable income. But you should also know that you can donate property—stocks, real estate, art, cars, etc.—to charities and that the effects can vary significantly.

Cash

Most charitable donations are in cash, whether it’s a few dollars in a bucket, a mailed check, or a few buttons clicked online.

Giving cash is the easiest way to donate to a public charity, and you can potentially take a tax deduction of up to 60% of your adjusted gross income (AGI). Any amount above 60% can be carried forward to future tax returns for up to five years. The deduction may be lower for donations to private charities.

Some charities may prefer cash vs. property donations, as money is typically easier for them to put to use. It’s important to talk to your charity of choice in advance, which could allow you to select how your money is used and where it goes. Still, many charities, especially larger ones, accept property donations.

Property

If you’ve never considered cash vs. property donations, the difference could be significant, depending on your financial situation. While donating a non-cash asset to a charity requires more paperwork, you and the charity can potentially come out ahead of a simple cash donation.

Consider, for example, donating a long-term appreciated security. Instead of selling the security and handing over the cash to a charity, you can donate the security directly. Doing so allows you to avoid paying a capital gains tax on the appreciation, and you can deduct the value of the stock up to 30% of your AGI. This scenario also leaves more money for the charity.

If you want to continue holding a position in the securities, the IRS allows you to immediately buy back the same number of shares.

Beyond appreciated long-term securities, here are other possible property donations that could impact your gifts and taxes:

  • Short-term appreciated securities
  • Long-term and short-term depreciated securities
  • Real estate
  • Art
  • Vehicles

Discussing giving cash vs. property donations with your financial professional can help you find the right charitable giving and tax-planning strategy.

Consider Creating a Public Charity Fund

You might also consider creating a public charity fund, such as an Investment Donor-Advised Fund or a Family Foundation PlusSM fund from The Dayton Foundation. These structures allow you to contribute cash and/or property that can either be donated immediately to a charity or remain in the fund and grow tax-free.

These strategies are popular choices for a few reasons: You retain control, choose your successor advisor, recommend the charities to receive gifts, avoid capital taxes, and you can take a tax deduction for the contribution year. Cash contributions are deductible by up to 60% of your AGI, and the tax deduction for property is 30%.

Find a Financial Professional to Aid Your Charitable Giving

Whether cash or property donations are better for you depends on several factors, which a wealth manager at Anderson Financial Strategies can go over with you.

Your strategy for helping the causes that mean something to you may include both cash and property donations. We can help you work toward finding the ideal arrangement that can offer the maximum donation as well as the maximum allowable tax deduction.

If you would like to explore our services for your family or business, please call us at 855-237-4545 to schedule an executive briefing to discuss your goals.

About Shon

Shon Anderson is president and chief wealth strategist at Anderson Financial Strategies, LLC with over 20 years of experience. As a fiduciary, Shon’s mission is to provide his clients with quality financial expertise along with rapidly responsive service through an honest relationship. He specializes in providing family office-style services to help his clients organize and focus their financial life. Shon graduated from Wright State University with a bachelor’s degree in financial services and an MBA in finance. He is a CERTIFIED FINANCIAL PLANNER™ practitioner and holds the Chartered Financial Analyst® (CFA®) certification. His insights have been quoted in leading financial news publications such as CNBC, Yahoo Finance, Fox Business, Consumer Reports, Forbes, Bankrate.com, Investment News, and Kiplinger. Shon serves as an adjunct professor teaching personal finance courses at Wright State University, leads CFP® exam review courses for Keir Educational Resources, and is president of the CFA Society Dayton. Shon and his wife, Jessica, reside in Sugarcreek Township, Ohio, and are blessed with triplet daughters, Elizabeth, Bridgette, and Alexandra, along with their son, Jacob, and dog, Jack. Over the years, Shon has been involved in several volunteer organizations including the Wright State chapter of Delta Tau Delta as an alumni advisor and was a Big Brother in the Big Brothers/Big Sisters program. To learn more about Shon, connect with him on LinkedIn.