Tax relief when you donate to a charity
2. Gift Aid
Donating through Gift Aid means charities and community amateur sports clubs (CASCs ) can claim an extra 25p for every £1 you give. It won’t cost you any extra.
Charities can claim Gift Aid on most donations, but some payments don’t qualify.
What you need to do
You need to make a Gift Aid declaration for the charity to claim. You usually do this by filling in a form – contact the charity if you haven’t got one.
You must give a declaration to each charity you want to donate to through Gift Aid.
You can include all donations from the last 4 years. Tell the charity about any tax years where you didn’t pay enough tax.
Paying enough tax to qualify for Gift Aid
Your donations will qualify as long as they’re not more than 4 times what you have paid in tax in that tax year (6 April to 5 April).
The tax could have been paid on income or capital gains.
You must tell the charities you support if you stop paying enough tax.
Higher rate taxpayers
If you pay tax at the higher or additional rate, you can claim the difference between the rate you pay and basic rate on your donation. Do this either:
Example You donate £100 to charity – they claim Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).
With Payroll Giving, you don’t pay the difference between the higher and basic rate of tax on your donation.
Getting tax relief sooner
In your Self Assessment tax return, you normally only report things from the previous tax year.
But for Gift Aid, you can also claim tax relief on donations you make in the current tax year (up to the date you send your return) if you either:
- want tax relief sooner
- won’t pay higher rate tax in current year, but you did in the previous year
You can’t do this if:
- you miss the deadline (31 January if you file online)
- your donations don’t qualify for Gift Aid – your donations from both tax years together must not be more than 4 times what you paid in tax in the previous year
If you don’t have to send a tax return, contact HMRC and ask for a P810 form. You’ll need to submit it by 31 January after the end of the previous tax year.
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: Donating straight from your wages or pension
Based on the Random House Dictionary, © Random House, Inc. 2017.
This was before Cassidy entered politics, and the Republican congressman now calls that donation a “youthful indiscretion.”
However, a concert is a far more unusual gift that is rarely considered a donation.
Some saw their donation as a ticket to a theme park roller coaster ride.
The repairs cost an estimated $15 million, but the price tag was cut in half by a donation from David M. Rubenstein.
The Bradley donation, of $2,000, was made in 1989, as Bradley was a year out from his second re-election bid.
Then if it sends the petition this year you will give the donation, I suppose?
We wondered that our honoured lord, your nephew, went not up with the donation this day.’
I cannot describe the joy I had in God when I received this donation.
The State of Alabama, in which it was placed, gave it an annual donation.
He wound up, of course, by telling of this donation from an unknown well-wisher.
© William Collins Sons & Co. Ltd. 1979, 1986 © HarperCollins
Publishers 1998, 2000, 2003, 2005, 2006, 2007, 2009, 2012
early 15c., from Old French donacion (13c.), from Latin donationem (nominative donatio ) “a presenting, giving,” noun of action from past participle stem of donare “give as a gift,” from donum “gift,” from PIE *donum “gift” (cf. Sanskrit danam “offering, present,” Old Church Slavonic dani “tribute,” Lithuanian duonis “gift,” Old Irish dan “gift, endowment, talent,” Welsh dawn “gift”), from root *do- “to give” (see date (n.1)).
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See a Sample Gift-in-Kind Donation Request Letter
When asking for a donation, a gift-in-kind, or services from a corporation, it is best to use a letter.
Companies prefer a letter, spelling out exactly what you need, rather than a more formal proposal such as you would provide to a foundation.
Some corporations do have online application forms so check to see if this is the case. A call to the corporate office that handles corporate giving will do to get this information or a visit to the business website.
Below is a fictional sample letter to a corporation requesting a gift-in-kind, based on a format recommended by Beverly A. Browning, author of Grant Writing for Dummies (Buy from Amazon).
Notice that, even though this request is a letter, it is very specific. It describes the work of the organization in detail and spells out exactly what it needs from this company. The more specific you can be, the easier it is for the company to say yes.
Besides the details of your request, include a story that will touch even a corporation. In this letter, the postscript contains that story.
The Gravitas Neighborhood Senior Center
90123 S. Lindenwood Lane
Monsoon, IA 14399-5678
Ms. Lauren M. Funder
Senior Vice President and Corporate Giving Officer
Cooper Restaurant Equipment Corporation
10903 Birdseye Terrace
Monsoon, IA 28281-7777
Two hundred of the 425 people over the age of 65 who use our senior center are considered to be living below the state poverty level. Most of those receive their morning and noon meals through our meals program on site.
In the past two years, the number of older adults living below the poverty level in Butler County, District 9, has risen 10 percent annually.
Many of those have found their way to our Senior Center and to our daily meals program, where we serve nearly 300 breakfasts and lunches daily for a sliding fee based on income.
The neighborhoods surrounding our senior center contain primarily lower middle-class families, the working poor, and older people living on modest fixed incomes in their small homes, senior apartments, or with their adult children. The Senior Center is the only possible safe environment for most, outside their homes, and they come nearly daily for companionship, recreation, and warm meals.
Located in Monsoon, Iowa, The Gravitas Senior Center was founded in 1985 by the Butler County Council on Aging, which serves a large senior population throughout the county s 75 square miles.
The Gravitas Neighborhood Senior Center s mission is to provide a safe and nurturing environment to support the social, physical, and health needs of the neighborhood s older adults.
Over 100 volunteers and four full-time staff assist in the Center s daily programs and activities throughout the year. The Center offers several outstanding programs such as:
- Young Forever: An exercise program with subgroups of differing physical abilities. The groups include dance classes, chair yoga, an outdoor walking program, using a 1/2 mile track on the Center s grounds, and water aerobics, in the Center s indoor pool.
- Games for Brains: A program of games for varied interests and abilities encompassing computer games, trivia, and puzzles to chess, checkers, and other board games. Several reading groups are included in this program as well as the Brain Olympics program delivered by faculty and students from the University of Iowa.
- Lecture Me Now: A series of presentations by experts in longevity and aging, as well as entertainment ranging from films and staged performances by the Community Theater of Monsoon, to visits by groups of school children who sing, dance, and perform.
- Meals for Life: Serving a hot breakfast and a hot lunch that follow federal standards for age appropriate nutrition. In any given week, we provide approximately 800 meals.
According to the May 2015 issue of the American Journal of Gerontology, older adults are 89 percent more likely to be physically and mentally active if they have a safe and attractive place to get together, and if they receive at least one nutritious meal daily.
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The seniors in our community would not have these advantages were it not for the work of the Gravitas Community Senior Center. Many, who live at or below the poverty level, would never receive a nutritious meal, much less two in one day.
In fact, many of the neighborhood s elders would find themselves isolated and without safe opportunities to exercise, to socialize, or to invigorate their brains if it were not for our facility.
The Center is open six days per week from 8 a.m. until 6 p.m. It feeds, provides social opportunities and exercise of mind and body to the otherwise underserved senior population of our neighborhood.
The warmth and laughter within the Center s walls attest to the pleasure and health provided by the Senior Center to our community.
Unfortunately, our meals program has dilapidated and outdated appliances. As the Center s Executive Director, I am writing to you to request a gift in kind of a commercial stove and refrigerator manufactured by your company.
Not only is your business located in Monsoon, Iowa, not far from our Senior Center in the Gravitas neighborhood, but your commercial kitchen equipment is also known for its durability and functionality. I know because I ve done extensive research on kitchen equipment, and your company s products stand out.
I have been particularly impressed by your Model 68B2 commercial stove and oven, as well by your 98 cubic foot, model 583J refrigerator. Both of these appliances would work well for our center considering the number of meals we prepare and the people we serve.
If your company chooses to help our Center, you will contribute more than just equipment. You will be a key partner in providing a healthy life for more than 400 older adults each week.
The result of your help and our services means that our seniors, many of whom are poor, can live engaged, alert, and physically active lives as long as possible. These elders should never be considered excess baggage but valued members of our community as long as they live.
Thank you so much for taking the time to read this proposal, and please do not hesitate to contact me at 485-312-4890 with any questions about this request. We are badly in need of new kitchen equipment and hope to begin the new year with it in place.
Hoping for your partnership,
Gravitas Neighborhood Senior Center
Enclosures: annual report, program brochure, and letter from the City of Monsoon
P.S. As I was writing this letter to you, I received a call from the family of a senior woman, desperate to find a safe place where their mother, recently arrived from New York, could find other people her age to meet in her new community.
I was able to assure them that their mother would find a welcoming community right here at the Center, as well as many programs that would keep her healthy, active, and alert. I could hear the relief in their voices as they made an appointment to bring their mother to the Center on Monday morning for introductions and a tour.
Example of a Charitable Gift Annuity
Alan and Connie Richards, 74 and 76 years old, have watched interest rates fluctuate for years.
They have not been satisfied with their money market fund currently earning 1.5%. They have looked at ways they could get back to the 5-6% rate of return they were used to. However, they do not want to increase their market risk by investing in securities that would fluctuate in value.
For a number of years they have been actively involved with several local charities. In addition to supporting them financially, Connie and Alan have enjoyed volunteering their time and getting to really know the staff and having a deeper understanding of their mission and how they change lives. One day while helping out at her favorite charity, Connie had an opportunity to drop in on the Development Officer and asked her if there was anything that they could do that could help the charity and provide Alan and Connie with some additional income. Connie excitedly brought back a brochure on Charitable Gift Annuities to show Alan.
The Development Officer explained that a Charitable Gift Annuity is a contract between the Richards and the charity. The charity will promise to pay Connie and Alan a fixed rate of return for both of their lives. In this case, the Richards were thinking of a $100,000 annuity. Based on the market conditions and other factors, such as their age, the rate* suggested by the American Council on Gift Annuities (ACGA) is 5.0%. This means that the charity promises and guarantees to pay them $5,000 a year, regardless of changes in interest rates, for the rest of their lives. Because they are not using appreciated assets to fund the gift annuity, part of their payment will be considered tax-free return of principal for the Richards.
Equivalent Rate of Return:
Current year Tax Savings:
Based on current calculations*, $3,980.00 of the $5,000 annual income will be free from income tax for 16.4 years. Also, part of their $100,000 is a charitable gift and therefore the Richards get a charitable tax deduction in the current year of $36,814.00. That deduction could save Connie and Alan $12,885 this year (based on their 35% federal tax bracket). These numbers do not consider any state taxes that may be applicable. The tax deduction and tax-free income mean the Richards’ effective annuity rate (what they would have to earn to equal it with fully taxable income) is 8.14%.
Connie and Alan are happy with the increased income and the tax savings, and they are really excited about what their gift will mean to their charity. A graphic illustration of a charitable gift annuity is available.
Example assumes a 2.0 percent applicable federal rate (AFR) and a federal income tax bracket of 35%. State tax liability is not considered. The IRS allows the AFR from the current or one of the two previous months to be used. For a gift annuity, the lower the AFR, the higher the tax free portion of the annuity payments. A higher AFR increases the charitable tax deduction.
* Based on the current ACGA suggested rates effective 1/1/12 unchanged as of April 24, 2017.
** Adjusted upward because the tax-free portion of $3,855 makes the $5,000 annuity equivalent to $7,091.92 of taxable income for a beneficiary in the 35% income tax bracket and the $36,814 charitable tax deduction reduces the cost of the gift by $12,885.
Please note, individual financial circumstances will vary. The information on this site is meant as general information and does not represent legal or tax advice.. As with all tax and estate planning, please consult your attorney or estate specialist. All material is copyrighted and is for viewing purposes only. This News and Information section has been compiled by Future Focus. Please report any problems to webmaster.
Charitable Gift Annuities
Want to make a sizeable donation to a favorite charity, get a tax deduction, and arrange for some guaranteed income (some of it tax-free) for life? If so, it s worth exploring a charitable gift annuity, which offers all these benefits. Another plus is that it s easy to create the charity will be more than happy to help you.
An annuity is a contract between you and the charity. You donate to the charity, and in return the charity agrees to make regular fixed payments to you (or to someone else you designate) for your lifetime. The goal is for the charity to end up with about half of your donation.
When you make your initial gift, you can take an immediate income tax deduction for the estimated amount that will eventually go to the charity, after all the annuity payments have been made. A portion of the payments you receive will also be tax-free, until you reach your statistical life expectancy.
Is investing in a gift annuity safe? Your return isn t guaranteed by the government. So it depends on the charity. If it files for bankruptcy or ceases to exist, you would be out of luck a good reason to pick a well-funded and well-run charitable organization. Some charities have insurance to cover annuity payments.
The annuity pays you a set rate of return on your donation annually. The older you are, the higher the interest rate you will receive on the donated amount. The interest rates are suggested by the American Council on Gift Annuities (ACGA), a nonprofit organization that promotes these annuities. It sets the rates by looking at statistical life expectancies and tries to calculate the rate necessary to have 50% of the initial donation go to the charity.
For 2013, the ACGA suggests that a 55-year-old be guaranteed a 4% annual return. At age 65, the rate is 4.7%, and at age 70, it goes up to 5.1%. If you and your spouse create a gift annuity together, the rate is based on your combined statistical life expectancies. For a 55-year-old with a 60-year-old spouse, the rate is 3.7%. If one spouse is 68 and the other 70, the rate is 4.5%. (For a complete list of rates, see the ACGA website.)
Obviously, these are much better returns than you can get currently with a certificate of deposit. But the interest rate is locked in for your lifetime which you may consider a drawback or an advantage. If interest rates go up significantly, you might wish you had made a different investment.
Payments can start immediately, or be deferred until you reach a certain age. Typically, payments are made quarterly.
Minimum Donation Amounts
Each charity sets a minimum amount you must donate if you want to set up a gift annuity. Commonly, the minimum amount is as low as $5,000 (Doctors Without Borders, the Denver Zoo, Salvation Army, American Red Cross) or $10,000 (PETA, Braille Institute of America, Amnesty International USA, University of California). If you re interested in a particular charity, check its website to see whether it has a gift annuity program and how much you must donate.
Charitable gift annuities also set a minimum age for those wishing to donate; for most organizations, it s 50 to 65. That suits most people who are interested in annuities, who are approaching retirement and looking for regular income.
If you want to make a gift but are younger, you can defer the payment of benefits until the required age. You ll still get a tax deduction for your charitable gift now, and if your donation grows (as it s invested by the charity) you won t owe tax on the increase in value.
Charitable gift annuities have some tax advantages you can t get with other investments or methods of donation.
Immediate tax deduction. When you donate, you get a tax deduction not for the entire amount you donate, but for that amount minus the expected amount you ll get back in payments over your lifetime.
Capital gains tax deferral. If you donate appreciated securities, there s another tax advantage: you won t owe capital gains tax when you make the transfer. Only some of your capital gain will be taxed (because part of the money will stay with the charity), and the tax will be spread out over all of your annuity payments.
Non-taxable income. A portion of the annuity payments aren’t taxable; it is treated as the return of the principal you handed over to the charity. After you reach your statistical life expectancy, however, you ll pay tax on the payments as ordinary income.
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