Tax Advantages for Giving To PNW
State of Indiana College Tax Credit
Indiana taxpayers may take a tax credit of half (50 percent) of their gift to Purdue Northwest. For a joint return, the maximum credit is $200 (based on a gift of $400 or more), and for a single return, the maximum credit is $100 (for a gift of $200 or more).
The tax credit directly reduces the “bottom line” of your state income tax by reducing the amount you owe in taxes. All it takes is your gift to Purdue Northwest and filling out one simple form, the Indiana CC-40 (located in “College Credit” section).
Federal Tax Advantages
Contributions to the Purdue Foundation are deductible as charitable contributions within the limits of the Internal Revenue Code.
1. Federal Tax Advantages: Cash Gifts
Cash gifts are deductible up to 50 percent of adjusted gross income, with any carryover applied within five years.
The net cost of a $1,000 cash gift to a donor in the 35% marginal tax bracket is only $650 after the $350 tax savings.
2. Federal Tax Advantages: Personal Property (Gifts-in-Kind)
Gifts-in-kind (books, livestock, works of art, etc.) are deductible at the full fair-market value if they are related to educational programs or activities of the University and have been held for more than one year by the donor. Unrelated gifts-in-kind also may be made.
3. Federal Tax Advantages: Gifts of Appreciated Property
With careful planning, charitable gifts of certain types of assets will provide even greater tax benefits to the donor than a gift of equivalent value in cash.
- Gifts of appreciated property (securities and real estate) held for more than one year are deductible up to 30 percent of adjusted gross income with no capital gains tax on the appreciation. The deduction is based on the fair market value of the donated property.
- Gifts of appreciated property held for less than one year are deductible only up to the cost basis in the property, with a limit of 50 percent of adjusted gross income.
The charitable deduction for gifts of property that would yield ordinary income or short-term capital gain if sold is limited to the donor’s tax basis (usually the original cost of the property). Gifts of appreciated property held long-term provide a double tax benefit.
The full fair-market value of gifts of long-term appreciated securities or real estate is deductible up to 30 percent of a donor’s adjusted gross income. Any amount in excess of the 30 percent ceiling can be carried forward for up to five years.
Mr. Albert, who is in the 28 percent income-tax bracket, owns securities currently valued at $22,000, which he purchased several years ago for $2,000. He contributes the securities to charity and realizes a $22,000 charitable deduction, which saves him $6,160 in income taxes (28 percent of $22,000).
In addition, Mr. Albert avoids the potential capital-gain tax on his $20,000 paper profit. This means a further savings of $3,000 (15 percent of $20,000). Thus, the actual cost for Mr. Albert for the gift of $22,000 in appreciated securities is only $12,840 ($22,000, less $6,160, less $3,000).