Q. My CPA says that large charitable gifts of property are subject to a 30-percent-of-AGI limit. Is that based on the gift’s current value? H.K., Mt. Olive, N.J.
A. Yes. If you donate property that would have qualified for long-term capital gain treatment if sold, the IRS generally bases the deduction on the property’s fair market value on the gift’s date. Thus, you avoid income tax on the appreciation in value. But the IRS limits deductions for such charitable gifts to 30 percent of your AGI.
For example, if you donate art valued at $35,000 and your AGI is $100,000, the IRS limits your deduction to $30,000. The excess $5,000 can be carried over for up to five years.
Tip: If you choose to use the property’s basis for deduction purposes, the 30 percent limit doesn’t apply. But your charitable contributions for the year can’t exceed 50 percent of your AGI.