As you have likely read or heard, tax uncertainty in 2013 may make 2012 a better year for donors to make gifts to organizations such as Millikin.

Donors making larger gifts usually consider tax efficiency in their decision-making process, so the uncertainty about next year’s tax laws is making those decisions more difficult.

Charitable gift deductions may be limited next year and taxes on capital gains could rise, too. Both considerations are in play for high-income folks who are contemplating year-end charitable gifts.

CAPITAL TAX GAINS SET TO EXPIRE DEC. 31.

The special tax rates on long-term capital gains are scheduled to expire Dec. 31, 2012. Starting in 2013, the tax rate on realized long-term capital gains will stand at 20 percent (or 10 percent if a taxpayer is in the 15 percent tax bracket) and capital gain income will also be subject to an additional 3.8 percent Medicare tax.

Many financial advisors tell us they are urging clients to consider selling highly appreciated securities in 2012 before the new capital gains tax rate takes effect. Donors who are contemplating such a strategy – and who are planning to fund a charitable commitment to Millikin in 2012 – may also wish to consider gifting the highly appreciated securities to fund their charitable commitment. Such a gift qualifies for a charitable gift deduction at 100 percent of market value (to the extent provided by law) at the time of gift – even though the donor's cost basis may be significantly lower. The transaction is also free of any capital gain tax burden as it is the tax-exempt charity – Millikin – that will sell the securities in order to realize the gift.

FOR MORE DETAILS

Consult your financial advisor and contact Millikin’s Alumni & Development Office.