Alumni Donations vs Taxes: A True Rivalry

Zoe Team

Nov 2, 2019

4 min read

A financial advisor reviewing a plan with two clients at a table

Key Takeaways

Charitable donations to higher education can offer significant tax deduction benefits.
Donating appreciated assets like stocks may maximize your tax savings compared to cash gifts.
Strategic giving requires balancing philanthropic goals with personal tax optimization.

Frequently Asked Questions

How do alumni donations affect my taxes?

Qualified donations to higher education institutions can be deducted from your taxable income, potentially lowering your overall tax bill.

Is it better to donate cash or stock?

Donating appreciated stocks is often more tax-efficient as you avoid capital gains tax while still receiving a deduction for the asset’s market value.

How can I maximize my giving impact?

Work with a financial advisor to integrate your philanthropic goals into your overall wealth management and tax strategy.

How does charitable giving to higher education work? And how does it affect your finances? Alumni donations can be a great way to optimize your taxes.

Whether it’s Trojans vs. Bruins, Longhorns vs. Aggies, or even Badgers vs. Gophers, we all want our alma mater’s to win. Whether it’s on the field, on the stage, or in the classroom, donations are an essential part of the alumni experience.

According to Bloomberg reports, the Tax Policy Center estimated that the Tax Act (December 2017) reduced the overall $300 billion of charitable giving by as much as 5 percent. An estimated $40 billion of charitable giving goes to universities and colleges, money that is central to their functioning. So how does charitable giving to higher education work? And how does it affect your finances?

How It Works

The Internal Revenue Service allows you to claim tax benefits on donations made to higher education institutions. these institutions must be set up as “non-profit” entities in the eyes of the IRS, otherwise these donations are still taxable. For instance, a for-profit technical school would not allow for tax deductions from your income. Wondering if your institution is tax exempt? Find out using the Exempt Organization list from the IRS.

Clubs and Organizations

The IRS lets you contribute to non-profit institutions, as well as non-profit clubs and organizations associated with the college or university. But there’s a catch! If you receive a gift in lieu of your donation, you can only deduct up to the additional amount leftover after the price of the gift is deducted.

Example: You donate $120k to your alma mater’s theater department. In return, you recieve season theater tickets valued at $20k. On your taxes, you may only claim a charitable contribution of $100k.

Lets take a step further? For athletic events specifically, anyone who purchases sporting event tickets in exchange for a donation can only deduct up to 80% of the additional amount leftover after the price of the tickets is deducted.

Example: You donate $120k to your alma mater’s football team. In return, you receive season tickets valued at $20k. On your taxes, you may only claim a charitable contribution of $80k, 80% of the leftover $100k after the tickets.

What if I don’t want to donate money?

It’s cool! There are other ways to donate to your alma mater, while still qualifying for tax exemptions. These non-monetary donations are limited, but some options include vehicles, furniture, electronics, appliances, property, and patents. The calculated donation amount for these items is based on “fair market value”, according to the IRS.

Is there a catch? Of course! You can only deduct the amount you initially paid for an item, lest any appreciation.

Example: If you buy a building and renovate it so it’s much nicer, and then donate it to a university, you will only be able to claim the original amount you paid for the building prior to it’s renovation.

So… What doesn’t qualify?

The IRS will not recognize contribution to an individual student’s or faculty’s tuition or fees as a charitable contribution. As mentioned, if the university, college, club, or organization operates as a for-profit entity, they are not eligible for tax exemption by the IRS.

Important Reminders

As far as contribution limits are concerned, even if your contribution is fully deductible, you cannot claim any amount of contributions that are over 50% of your adjusted gross income (AGI) for that specific year.

Make sure to get documentation from your college or university for any donations made. For cash donations, you can use a cancelled check to verify any donations under $250. For anything over $250, you’ll need a receipt from the university that includes the amount of the donation as well as the date it was donated on. When it comes to property or item donation, an itemized list of the donations must be included with the receipt. For items over $5,000, an appraisal of the items is also required.

How does charitable giving to higher education work? And how does it affect your finances? Alumni donations can be a great way to optimize your taxes.

How It Works

Clubs and Organizations

What if I don’t want to donate money?

Is there a catch? Of course! You can only deduct the amount you initially paid for an item, lest any appreciation.

So… What doesn’t qualify?

Important Reminders

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