FIRST UNIVERSALIST UNITARIAN CHURCH

504 Grant Street

Wausau, WI 54403

 

TAX BENEFITS OF GIVING

 

Income Tax Deduction

 

For those who itemize deductions, the tax savings for your charitable contribution can be substantial.  Those in the 25%, 28%, or 33% federal tax brackets will, in effect, receive a rebate of that amount in the form of reduced income taxes.  The state of Wisconsin taxes most of our members an additional 6%.  Thus, for those who itemize their deductions, from 31% to 39% of the building pledge will become a tax credit.  Some will use this knowledge to increase their pledge by 50% over their originally planned gift since this amount represents “Uncle Sam’s and Wisconsin’s contribution “ to First Universalist Unitarian Church of Wausau.

 

Example 1.  Sara, age 35 and single with taxable income of $50,000 (approximately a 33% combined tax rate) has decided she can budget $100 per month over three years from here income for a total pledge of $3,600 to the Capital Fund Drive.  Sara is delighted to find that she can give $150 per month for a three-year total of $5,400 because of the tax savings.  She adjusts her W-4 (tax withholding form) to reflect the tax savings—and increase her take home pay.

 

 

            $5,400 Gift - $1,800 Tax Savings (33% of $5,400) = $3,600

                                                                            divide by 36 months           

                                               

                                                Sara’s after tax cost:     $100 per month

 

 

Types of Property That May Have Appreciated in Value

 

·        STOCK

·        INCOME PRODUCING REAL ESTATE

·        BONDS SELLING AT A PREMIUM

·        VACANT LAND

·        MUTUAL FUND SHARES

 

You must have owned the property for a minimum of 12 months and one day in order to quality for the tax benefits of giving property that has appreciated in value.

 

 

 

Appreciated Property (Stocks, bonds, real estate, mutual funds)

 

Giving stock or other property that has gone up in value provides a double tax savings.  Ordinarily when such assets are sold, the federal capital gains tax takes 20% of the appreciation.  The state of Wisconsin will take another 6%.  For example:

 

                        CURRENT STOCK VALUE                        $15,000

                        COST OF STOCK                                          -5,000

                        CAPITAL GAIN                                             $10,000

                        TAX RATE                                                        x   .26

                        CAPITAL GAINS TAX                                  $  2,600

 

If this stock were instead given to the Capital Fund Drive, no capital gains tax would be paid by the donor or by First Universalist Unitarian Church (as a charitable organization, the church pays no income tax when the stock is sold).  Yet the donor gets the tax deduction for the entire $15,000 value of the gift.

 

 

           Gift of Cash          Gift of Stock

 

                $15,000                  $15,000          Value of cash or stock 

 

                     -0-                        -2,600           Capital Gains Tax Avoided

                   -5,100                    -5,100           Taxes Saved in 34%                                                                                      rate ($15,000 x .34)

 

                $  9,900                  $ 7,300          Total After-Tax Cost of Gift

 

           

 

 

IMPORTANT POINT.  TO AVOID THE TAX ON THE CAPITAL GAIN, THE DONOR MUST TRANSFER THE APPRECIATED PROPERTY TO THE CHURCH’S ACCOUNT.

 

If you are considering a gift of appreciated property, please contact a member of the Combined Campaign Steering Committee for details on how to do it.

 

Technical Notes

 

Gifts of appreciated property are limited to no more that 30% of your adjusted gross income.  The good news, however, is that the excess can be carried forward into subsequent tax years.

 

The Omnibus Budget Reconciliation Act of 1993 eliminated any negative impact of the Alternative Minimum Tax (AMT) on charitable gifts of appreciated property made after 1992.