Tax Benefits & Considerations
Tax Benefits
Your gift may provide you with federal and state income tax benefits:
- If you itemize deductions on your federal income tax return, you may be able to deduct your contribution to U-M from your adjusted gross income. In addition, gifts of appreciated property avoid long term capital gains tax. Check with your tax advisor for deduction and capital gains tax requirements and limitations for your situation.
- Your state may also allow a credit or deduction. For example, Michigan residents may take a credit against state tax of 50 cents for each dollar of their gift to U-M, with a maximum tax credit of $100 for taxpayers filing singly or $200 on a joint return.
Tax Considerations
As you consider your year-end giving, please be aware of the following income tax considerations when giving to the University of Michigan College of Engineering. As always, you should consult a qualified tax professional for tax advice. But some tax issues to consider when making your contribution include:
State of Michigan
For state of Michigan taxpayers-A partial income tax credit can be claimed for donations to the University of Michigan (and other qualifying Michigan public institutions-see instructions for Line 20 of MI-1040). The amount of the credit is the smaller of 50% of the contribution or $100 ($200 for a joint return). Credits are a direct reduction of your tax liability.
Federal Income Taxes
If you are itemizing deductions, you may deduct contributions to the University of Michigan (and also other qualifying charities) using Schedule A to form 1040. These reductions reduce your taxable income and thereby reduce your tax liability by the amount of your donation multiplied by your marginal tax rate.
Some hypothetical examples of the powerful impact of this leveraging:
State of Michigan and Federal Tax Savings*
| Filing Jointly | Filing Singly | |
| Gift Amount | $400 | $400 |
| Federal Tax Savings (400 x .25) |
($100) | ($100) |
| Michigan Tax Credit | ($200) | ($100) |
| Federal tax attributed to decrease in state tax itemized deduction because of decreased Michigan tax paid. ($200 or $100 reduction in state taxes x .25) | $50 | $25 |
| Actual Cost of Gift | $150 | $225 |
Federal Income Tax Savings*
| Gift Amount | $500 | Gift Amount | $250 |
| Federal Tax Savings (500 x .25) |
$125 | Federal Tax Savings (250 x .25) |
($62.50) |
| Actual Cost of Gift | $375 | Actual Cost of Gift | $187.50 |
*These illustrations assume no other reduction in itemized deductions and assume taxpayers filing in the 25% tax bracket who itemize deductions on their federal return.
For more information about giving to the College of Engineering or the University of Michigan, please see: http://www.giving.umich.edu/
