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Old 05-08-2017, 03:57 PM
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Tax efficient charitable donations

If I own a C Corporation, is it better to make donations to my favorite 501(c)3 charities from my corporation rather than individually? It appears that would get the same amount of cash to charity with pre tax dollars rather than post tax dollars. (I am subject to the itemized deduction phase out because of high personal income.) Am I missing something?


Last edited by Julie Pierce : 05-08-2017 at 04:08 PM.


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Old 05-08-2017, 07:23 PM
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Quote:
Originally Posted by Julie Pierce View Post
If I own a C Corporation, is it better to make donations to my favorite 501(c)3 charities from my corporation rather than individually? It appears that would get the same amount of cash to charity with pre tax dollars rather than post tax dollars. (I am subject to the itemized deduction phase out because of high personal income.) Am I missing something?
the tax benefit from charitable giving is not reduced for many, if not most, high-income taxpayers. The phase-out rule reduces an itemized deduction?s tax benefit. Technically, the charitable deduction, as an itemized deduction, is subject to the phase-out rule corps (other than S corps) can deduct charitable contributions on their income tax returns, subject to limitations. In fact, the only entity able to deduct a cash charitable contribution as a business expense is a C Corp. A corp cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. Corps can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% of taxable income limit. The corp loses any excess not used within that period. For example, if a corp has a carryover of excess contributions paid in 2016 and it does not use all the excess on its return for 2017, it can carry the rest over to 2018, 2019, 2020, and 2021. A carryover of excess contributions cannot be deducted in the carryover year until after contributions made in that year (subject to the 10% limit) are deducted. So you need to choose larger deductible donation amount


Not only can these limits effect how much of a deduction you can get for your charitable donations, but it can also be effected by capital gains. When you sell any appreciated assets, such as property or stocks, you will owe capital gains tax on any appreciated profit on that property. However, if you donate that appreciated asset directly to the charity versus selling it and then donating the after gains profits, you will not have to pay the capital gains tax



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