Year-end planning is an annual ritual for people who coordinate their tax preparation with their charitable giving. Anticipating the end of the year takes on additional significance as we adjust to ever-changing tax laws and shifting financial markets.
Completing a gift by December 31 can help you reduce your tax bill for this year while supporting Indiana University and making a difference for future generations.
A one-time monetary gift is the simplest and most popular type of charitable gift.
When you itemize deductions, a cash gift is deductible up to 60 percent of your adjusted gross income (AGI). Your actual tax savings depends on the amount of your gift as well as your marginal income tax bracket.
When you write a check to IU, you can deduct it for this year as long as you mail it so that it’s postmarked by December 31, even if we don’t cash it until next year. When you charge your gift to a credit card, you can deduct the gift in the year the charge is posted to your account.
To enjoy even greater tax savings, you can also make gifts to IU with appreciated stock or mutual fund shares (held for more than one year) or property (real estate, bonds, some collectibles). When you itemize, you receive an income tax charitable deduction for the full fair market value of the shares and you owe no capital gains tax on the appreciation, even when the gain has never been taxed. By leveraging an untaxed gain to generate tax deductions, you substantially reduce the tax on your reportable income.
Jensen owns long-term appreciated stock purchased for $1,000 that is now valued at $5,000. If he sells the stock, he will incur a capital gains tax of $600 (15 percent of the $4,000).
Instead, Jensen chooses to use the stock to make a gift to IU. Because he itemizes, he enjoys a deduction for the full fair market value of the stock ($5,000). In his 35 percent tax bracket, the deduction saves him $1,750 and he bypasses the $600 capital gains tax liability. Therefore, the net cost of his gift is only $2,650 ($5,000 − $1,750 − $600) compared to $3,350 for a cash gift of $5,000.
Because the tax law rewards gifts of long-term appreciated property, you actually can have a greater impact with your gifts at a lower cost.
Your deduction is limited to 30 percent of your AGI. When your deduction exceeds the 30 percent-of-AGI limitation, you may carry over your excess deduction for up to five years.
If you make a pledge to charity or give an IOU, you can only deduct this as a charitable contribution in the year you actually satisfy the pledge or pay off the note.
You can make a gift of stock by electronic transfer or by personally delivering or mailing the actual stock certificate. Ownership of the stock certificate is changed to Indiana University Foundation on the books of the corporation issuing the stock.
“Loss property” is property that would generate a tax-deductible loss if you sold it. If you gave this property to IU, you would lose your deduction for the property’s loss in value. Instead, consider selling the property, taking the loss as a deduction, and using the proceeds to make your gift to IU.
If your employer offers a matching gift program, multiply the impact of your gift simply by requesting the match from your employer.
This method of giving is easy to carry out and the most popular non-cash gift. Simply transfer possession and any document of title to Indiana University Foundation. The gift is deductible up to 30 percent of AGI, with a five-year carryover provision. There is no capital gains tax owed on the appreciation.
If you are age 70½ or older and own an IRA, you can make a qualified charitable distribution (QCD) by transferring funds from your IRA to Indiana University. Transferred amounts count toward your required minimum distribution (RMD) if one is due, but no tax is due on the distribution (up to the $108,000 annual aggregate limit in 2025). At any time during the year, you can simply notify the IRA custodian to make a direct transfer from your IRA to IU. This is not only an easy way to give, but it can play a strategic role in your annual planning and have an immediate impact on the university’s mission.
Life income gifts are gift arrangements that pay you an income, provide immediate tax savings, and ultimately leave a legacy gift that can benefit Indiana University and make an impact on the causes you care about most.
One of the most popular life income gifts is a charitable gift annuity. In fact, they are so popular that many IU donors have more than one.
In exchange for your gift, you receive fixed payments for your lifetime and qualify for an immediate income tax charitable deduction, subject to limitations under federal tax law. The payment amount is based on the age(s) of the beneficiary(ies) and is partly tax-free until the beneficiary reaches life expectancy.
If you give appreciated property, you can recognize some of the capital gain pro-rata over your life expectancy (if you are the primary beneficiary). You can deduct the value of the property given, minus the present value of the income stream from the annuity, subject to the 60 percent (cash gift) or 30 percent (long-term appreciated property) of AGI limitation.
Charitable gift annuities are easy to set up, and can provide you with an excellent opportunity to make a deductible year-end gift and receive a welcome boost to your retirement income.
Setting up a charitable remainder annuity trust (CRAT) will pay you or another beneficiary a percentage of the initial value of the assets donated to the trust for life or for a period of up to 20 years. There is no capital gains tax when you transfer appreciated property to the CRAT. You can deduct the present value of the charity’s remainder interest, subject to the 60 percent (cash gift) or 30 percent (long-term appreciated property) of AGI limitation.
A charitable remainder unitrust (CRUT) is more flexible than a CRAT and can act as a hedge against inflation. The CRUT will pay you or another beneficiary a percentage of the value of the trust assets as revalued each year—if the value of trust assets goes up or down, so does the payout amount.
There is no capital gains tax when you transfer appreciated property to the CRUT or when the trustee sells the property. You can deduct the present value of the charity’s remainder interest, subject to the 60 percent (cash gift) or 30 percent (long-term appreciated property) of AGI limitation.
We previously discussed how you can use a QCD to make a direct gift to IU, but a one-time life income QCD option is also an option. You use up to $54,000 (limit for tax year 2025) to fund a new charitable remainder trust or charitable gift annuity—a great way to support Indiana University and create a lifetime income stream.
You owe no tax on the distribution and it counts toward your RMD if one is due (generally age 73 and older). Spouses can each contribute up to $54,000 (in 2025) to fund a single charitable remainder trust or a joint-life charitable gift annuity.
Along with plans that include your loved ones, you may want to include a gift in your will for the programs that you love at Indiana University. There are many ways to go about this:
You can name IU as the beneficiary of a living trust, life insurance policy, or retirement plan account. Retirement plan assets in particular can pose tax problems for heirs, while other savings and investments can be transferred to heirs with no additional tax—and sometimes even with a step up in basis. A planned gift to IU, however, can reduce or eliminate these taxes on retirement assets and, at the same time, provide more for family members by allowing other assets to transfer free of tax.
Tax changes related to charitable giving are coming next year. Here’s what to expect starting in 2026 (for taxes to be paid in 2027):
These changes could make 2025 a strategic year for maximizing your giving.
Let our gift planning experts help you make the right plan to meet your philanthropic goals. Contact us by phone at 800-558-8311 or email at giftplan@iu.edu to get started.
The Indiana University Foundation solicits tax-deductible private contributions for the benefit of Indiana University and is registered to solicit charitable contributions in all states requiring registration. For more information, please review our full disclosure statement. Alternative accessible formats of documents and files on this site can be obtained upon request by calling us at 800-558-8311.
