The most effective way to support the Campus Development Plan is through cash gifts. But creative gifts of assets can include stocks, bonds and property (real estate and personal property such as artwork). These not only can provide you with charitable deductions, but often offer additional tax savings. We encourage you to contact the Howard Hospital Foundation at (410) 740-7840 to discuss how your gift can have the greatest impact and to explore strategic, tax-wise ways to make a gift.
A gift of cash is easy to make, and the gift is not subject to gift or estate taxation. A cash gift entitles you to a charitable deduction of up to 50 percent of adjusted gross income. If all deductible gifts in a year exceed the 50 percent limit, you may carry the excess amount over as a deduction for up to five years.
For example, Edna Smith has an adjusted gross income of $50,000 this year. She contributes $35,000 to the Campus Development Plan. She may deduct $25,000 this year and carry forward $10,000 to deduct next year.
Pledges provide you an opportunity to make a larger gift than you otherwise thought possible by committing your gift over a period of one to three years. Ideally, your pledge should be documented in writing.
Gifts of appreciated securities: stocks, bonds, mutual funds and other assets
Appreciated stocks and bonds are another popular asset you can donate to the hospital. That's because they're simple gifts and can offer you a greater tax benefit than an equivalent in cash.
Using appreciated assets entitles you to a charitable deduction for the fair-market value of the donated asset, and you can avoid paying capital-gain tax you would otherwise pay upon the sale of the appreciated securities. This tax deduction may be up to 30 percent of your adjusted gross income, and any amount over this limit may be carried forward for five years.
For example, Bob Cash and Betty Goodstock decide to donate to Howard County General Hospital. Mr. Cash made his gift in cash by sending a $10,000 check. Because he submits itemized tax returns and is in the 28 percent tax bracket, Mr. Cash can look forward to saving $2,800 in taxes. In other words, his gift to Howard County General Hospital will cost him only $7,200.
By contrast, Betty Goodstock invested $5,000 in a hot stock that has grown to a value of $10,000 in 16 months. When she made a direct gift of her shares of stock to the hospital, she entirely bypassed the capital-gain tax. Mrs. Goodstock receives an income-tax deduction for a gift of $10,000, which saves her $2,800 in taxes. (She, too, is in the 28 percent tax bracket.) In addition, she has also saved $750 in capital-gain tax, since her $5,000 profit from her appreciated stock would have been taxed at a 15 percent rate. It only cost Betty $6,450 to make her $10,000 donation.
The rules about giving real estate are essentially the same as for gifts of securities. Almost any type of real estate may be donated: undeveloped land, farms, commercial buildings, vacation homes or your residence.
Often, people don't realize that life insurance proceeds are taxable in their estate. Fully paid-up policies can prove very attractive as gifts, particularly when a policy has outlived the purpose for which it was originally purchased.
Closely held business stock
You may realize substantial tax benefits for this type of gift. For business owners and their family members with a substantial portion of their estates linked to their business, a gift of closely held stock can provide planning flexibility and tax minimization.