Making a Difference: Cash vs. Property Donations 

By Brett Gottlieb

Giving to charities is a noble act that allows individuals to support causes they care about. But when it comes to philanthropic contributions, taxpayers have to choose between giving cash or property. Both options have their own positives and negatives for financial planning. 

I wrote this article to provide insight into the pros and cons of each approach. My goal is to help you make an informed gifting decision that both aligns with your philanthropic goals and also your specific financial situation. 

What Is a Cash Donation? 

A cash donation is the simplest way to make a charitable contribution. It entails making a one-time gift or recurring contributions of cash directly to a nonprofit organization. Cash donations provide immediate liquidity to charities, allowing them to solve urgent problems and develop programs effectively. 

Additionally, cash donations are typically easy to manage, effectively lessening the administrative load for both donors and organizations. 

Ways to Optimize Cash Donations 

To optimize your cash donations, consider the following strategies: 

• Donor-Advised Funds (DAFs): With DAFs, you can make immediate tax-deductible contributions while maintaining control over when and how the money is distributed to the charity of your choice.
• Charitable Gift Annuities (CGAs): A CGA is a structured donation to a qualified charity in exchange for a fixed income stream for a predetermined amount of time, usually the donor’s or the designated beneficiary’s lifetime.
• Bundled Donations: Bundled donations involve making larger donations in a single year to exceed the standard deduction limit and claim a larger tax deduction. This strategy is particularly useful for high-income earners who are liable to increased tax rates.
• Matching Gifts: Many businesses match their employees’ charitable donations. You can utilize these initiatives to double or even triple the impact of your gift.

What Is a Property Donation? 

A property donation is when you give a gift of real estate or personal belongings to a qualified charity. Giving this type of donation can be an alternative way to help a cause while simultaneously earning a sizable tax deduction and potentially avoiding capital gains taxes. 

However, it’s important to take the property’s liquidity into account because it might take some time to sell and convert into cash for the charity. 

Consider the following two types of property donations: 

• Ordinary Income and Short-Term Capital Gain Property: Any property that would yield regular income or a short-term capital gain upon sale is considered ordinary income property. This includes capital assets held for less than a year. Ordinary income property can only be deducted for charitable contributions up to its fair market value minus the amount that would be considered ordinary income. In essence, this produces a charitable contribution deduction equal to the taxpayer’s cost basis.
• Long-Term Capital Gain Property: Assets held for more than a year are referred to as long-term capital gain property. In most cases, you can deduct the fair market value of long-term capital gain property when you give it to a qualifying charity. If the value of the property appreciates, this could result in a significant tax gain. However, there are specific guidelines and restrictions pertaining to the deduction amount and the kind of property that’s eligible.

Ways to Optimize Property Donations 

To optimize a property donation, consider the following strategies: 

• Collaborate With the Charity: Work together with the charity to verify a seamless ownership transfer and reduce any possible complications.
• Choose the Right Charity: Pick a charity that shares your beliefs and has a solid reputation. Additionally, confirm that the receiving organization can accept the property you intend to donate.
• Think About the Property’s Liquidity: Assess how soon the nonprofit can sell the property and use the proceeds to further its goals.
• Assess the Property: To precisely understand the property’s fair market worth, get a professional appraisal.

Need Help With Your Gifting Strategy? 

Please get in touch with us to arrange an appointment if you have any questions, concerns, or need assistance organizing your gifting plan. 

Our team at Comprehensive Advisor strives to serve our clients during the financial planning process through deep and meaningful relationships that last for generations. 

You can contact us by emailing info@ComprehensiveAdvisor.com or calling (760) 813-2125. 

About Brett 

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees, in business administration and economics, and is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals, and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children. 

Our team of qualified professionals have experience in the financial service industry, and our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial strategies for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a comprehensive retirement roadmap to help ensure their assets are preserved and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

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