Stefanie Lipson, Private Client Services Partner, recently spoke to WealthManagement.com regarding Michael Jordan's $10 million donation to the Make-A-Wish Foundation and how lifetime philanthropic contributions are treated for tax purposes.

Excerpts: 

“A lifetime philanthropic contribution made to a qualified charitable organization can produce income tax savings for the donor by generating an income tax deduction, which reduces the amount of the donor’s income that’s subject to income tax,” says Stefanie J. Lipson.

“However, the charitable deduction for an individual donor isn’t unlimited and can’t completely eliminate a donor’s income tax in a particular year. The maximum possible deduction is capped at 60% of the donor’s adjusted gross income—this 60% limitation, though, is applicable to a narrow category of contributions (generally, cash donated to a public charity) and is temporary and expires at the end of 2025, when the maximum possible deduction will revert to 50%.” 

“From a pure tax lens, a lifetime contribution to charity has two potential tax benefits, whereas most bequests on death have one tax benefit,” explained Lipson.

However, “the lifetime gift also creates the opportunity for a current income tax deduction for the donor, reducing the amount of income that the donor would otherwise pay income tax on, allowing an added tax benefit from the donor’s current philanthropy,” added Lipson.

One of the factors that goes into deciding whether to make a lifetime or at death transfer gift is whether the donor wishes to part with the assets during their lifetime. Some donors may have a hard time doing so while others would prefer “to see their generosity put to use by the charitable organization during their lifetime,” posits Lipson.

Resources

• WealthManagement.com