Tax Considerations

NPT CAT is a public charity, which allows donors to take the most favorable charitable tax deductions. You should consult your tax advisor to determine the appropriate deduction limits.

Tax Eligibility

You are eligible for an itemized income tax deduction on the date that you irrevocably gift your asset to NPT CAT. Any deduction will depend on the type of asset you contribute and your personal financial circumstances. This guide only addresses federal taxes. Rules and regulations regarding tax deductions for charitable giving vary state-by-state. Additional tax rules and regulations may apply depending on your individual circumstances. You should always consult a tax or legal advisor before making a charitable contribution to your DAF.

Tax Treatment of Donor-Advised Funds

The assets in a DAF at NPT CAT may accrue income from investment growth, dividends or capital gains. The income accrued is part of the DAF and therefore cannot be taxed except in limited circumstances involving particular assets such as S-Coporation stock or leveraged property. Additionally, any income can not be claimed as an additional charitable tax deduction. Income or loss in your DAF will be reflected in its asset value and shown in your NPT CAT DAF statements. When NPT CAT makes grants to charities—based on your recommendation—NPT CAT is granting its own assets. Accordingly, you may not take any additional charitable tax deductions for the DAF grants.

Estate Planning

The assets in a DAF at NPT CAT may accrue income from investment growth, dividends or capital gains. Contributions are irrevocable and are therefore not part of your personal assets. As such, they are not subject to either estate tax or probate. Consult a legal or tax advisor on how your DAF can maximize your estate plans.

Common Tax Deductions

  • Cash/Check: Your deduction is the amount of the cash contribution.
  • Publicly-Traded Securities: Your deduction is the fair market value of the securities for those held longer than one year. NPT CAT calculates the fair market value of publicly-traded securities as the mean of the high and low price reported on the date of contribution.
  • Mutual Fund Shares: Your deduction is the fair market value of the mutual fund shares contributed for those held longer than one year. NPT CAT calculates the fair market value of mutual fund shares as the closing price on the date of contribution.
  • Securities that are not publicly-traded: Your deduction is typically the fair market value of securities (that are not publicly-traded, such as closely-held or some restricted securities) that have been held for longer than one year. In most circumstances, the IRS requires a qualified independent appraisal to determine the fair market value of securities that are not publicly-traded. The cost of this appraisal cannot be paid for by NPT CAT.
  • Short-Term Securities: The deduction is limited to the cost basis or the current market value (whichever is lower) for securities (both publicly-traded and other securities) or mutual fund shares that have been held one year or less.

Other Tax Deduction Limitations

The Internal Revenue Code rules for charitable contributions impose "percentage limitations" against adjusted gross income in the year you make the gift.

  • Cash: You may deduct the full fair market value of a charitable gift up to 50% of your AGI in the tax year in which the contribution is made.
  • Appreciated Securities: For securities held longer than one year, you may deduct the full fair market value of a charitable gift up to 30% of your AGI.
  • Carry Forward Deductions: If you cannot use the full deduction in the year you make a contribution, you may use or "carry forward" any excess tax deduction for five additional years.
Copyright © 2012 NPT Charitable Asset Trust