Are contributions to private foundations tax deductible?
Yes, contributions to private foundations are generally tax-deductible. However, to benefit from these deductions, taxpayers must itemize deductions on their tax returns using Schedule A (Form 1040), forgoing the standard deduction. When you donate to a private foundation, which is technically a type of 501(c)(3) charitable organization, you can typically deduct the contribution from your taxable income, subject to various limitations and rules set forth by the Internal Revenue Service. There are, however, caps on the amount you can deduct. Specifically, cash donations to foundations are deductible up to 30% of your adjusted gross income (AGI), while contributions of appreciated property, like stocks and real estate, are capped at a 20% deduction of your AGI. If your contributions exceed these thresholds, the excess may be carried forward for up to five subsequent tax years.
When you donate non-cash assets to a private foundation, the tax deduction varies based on the type of asset and how long you've owned it. Publicly traded securities held for more than one year are generally deductible at their fair market value (FMV) on the date of donation. However, for other types of assets—such as real estate, private business interests, or collectibles—the deduction is typically limited to the lesser of the asset's FMV or its cost basis (the original purchase price plus any improvements or adjustments). If you have held any asset for one year or less, your deduction is limited to the cost basis. For contributions of $250 or more, a written acknowledgment from the foundation is required. For a deeper dive into the tax implications, please refer to the tax-benefits link provided.
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