Ice Bucket Challenge Raises the Bar for Charitable Donations

The incredible success of the ALS Association’s (ALSA) viral “ice bucket challenge” provides a new goal for charities everywhere and provides a reminder of the tax benefits of such donations.

The ALSA raises money to combat amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s Disease. The charity raised $94.3 million in donations between July 29 and Aug. 27, up from $2.7 million during the same time period in 2013. Much of the increase has been attributed to the ice bucket challenge, where people use social networks such as Facebook and Twitter to challenge others to donate to the ALSA or dump a bucket of ice water over their heads, although many people do both.

In addition to the good feeling (and social acceptance) that comes from accepting the challenge, charitable donations offer tax benefits for taxpayers. Donations are deductible in the year they’re given (not pledged), and last-minute donations are deductible as long as they’re made before midnight Dec. 31.

Taxpayers can also consider donating stocks, real estate or other investments they’ve held for at least 12 months, but the tax strategy depends on whether the investments have gained value. If they have, you can deduct their full market value and escape the long-term capital gains tax that would have been due when you sold the shares. If the investment has depreciated in value, it’s best to sell them, donate the proceeds to the charity and claim the donation deduction and the capital loss.

So charitable donations benefit both the charity and the donor. Think about that the next time you see someone reach for a bucket of ice water.