A gesture of generosity to favor another. The tax rules encourage giving to organizations of general interest. These reductions concern both the payment of money and the transmission of property. Here’s how and to whom they apply.
► What reduction after a donation?
Donations of money to associations help reduce income tax… for those who pay it! Accuracy is important. The device is part of the tax reductions: unlike tax credits – such as the one on the cost of employing employees at home – they do not allow non-taxable households to obtain a refund.
For the persons concerned, therefore, two reduction rates coexist, depending on the type of organization receiving the donation. The general rule is a tax reduction equal to 66% of the sums paid. But the advantage is increased to 75% for donations intended to help people in difficulty, whether to provide them with care, meals or accommodation.
In the first case (rate of 66%), a payment of €300 generates a tax reduction of €198. Thus, it “costs”, in the end, only 102 € to its author. In the second case, the same donation will lead to a tax reduction of €225, i.e. a real cost of €75. Note however that the tax reduction does not occur the year during which the donation is made, but the following year.
Many large charities fall into the category of donations eligible for the highest rate: Doctors of the World, Red Cross, Secours Catholique, Unicef, etc. This also applies to their recent appeals for donations for the victims of the earthquake in Turkey and Turkey. Syria.
The coexistence of the two rates requires vigilance when filling out the tax return. Indeed, donations intended for people in difficulty are to be declared in a different box from the others. If you make a mistake, you will not take full advantage of the tax benefit.
► What are the limits for the tax benefit?
Everyone can give as much as they want. But the tax benefit is capped. First of all, donations from the reduction increased to 75% come under a specific ceiling, set at €1,000. The share of donations exceeding this limit still benefits from the reduction, but at the “normal” rate of 66%.
Donations eligible for the 66% reduction are subject to another ceiling, which is global but high enough to affect few taxpayers. It is actually 20% of taxable income. If exceeded, all is not lost: «the excess can be carried over to the next five years»indicate the tax services.
Finally, the wealthiest taxpayers can also deduct their donations from the property wealth tax (IFI). The reduction is then 75%, up to a limit of €50,000. One condition, however: the donations must not have already been deducted from income tax.
► What organizations can I donate to?
Tax generosity is earned. To qualify for the tax reduction for donations, the organization must have a non-profit and disinterested management. “And it must not work for the benefit of a narrow circle of people”, specifies the tax administration.
As far as the object of the association is concerned, the field is vast. Of course, organizations of general interest with humanitarian, social, but also sporting, cultural or family goals are among the potential beneficiaries. We can also mention, for example, associations for the defense of the environment, higher education establishments, organizers of contemporary art exhibitions or theatrical performances, etc.
Regarding the tax on real estate wealth, special attention must be observed. The type of organizations eligible for the reduction for donations is more strictly defined. These are essentially establishments linked to higher education or research and public utility foundations. However, the list also includes organizations of the integration business type, which are not eligible for the income tax reduction.
► What are the rules for in-kind donations?
The donation in kind, for example of equipment or a work of art, is also eligible for the tax reduction. This requires assessing the value of the donated property. Income forfeiture may also be reported as a donation. This is the case, for example, when an individual sells the interests of a solidarity savings account, or lends premises to an association: the rent that he renounces to collect is a deductible donation.
To donate real estate (apartment, land, etc.) during your lifetime, a deed before a notary is mandatory. We then speak of a donation rather than a gift. “The notarial deed is also strongly recommended for other assets of a certain value, in particular to ensure that there is no impact on the future succession”, says Nadège Rodrigues, director of studies and communication for France generosities.
► How to organize a donation after his death?
Two possibilities exist. The first is, of course, to bequeath to an organization by will. Associations and foundations of public utility, but also charitable associations, those dedicated to medical research or relating to religion, are among the organizations authorized to freely receive bequests and donations.
“Upstream, it is possible to contact the organization to verify it. Associations of a certain size generally have a dedicated contact to support individuals with a bequest or donation project,” assures Nadège Rodrigues. In most cases, the association will not pay inheritance tax.
The second option is to designate the organization (charitable or otherwise) as the beneficiary of a life insurance contract. The formula has the merit of flexibility: no need to write a will and, if necessary, the modification of the beneficiary clause is simple. The particularity of life insurance is that it is not taken into account in the context of the estate: the beneficiary organization will therefore escape, there too, the taxation linked to the inheritance.
► What precautions regarding heirs?
In the absence of children and a spouse, a bequest or a donation to an association does not present any particular constraints. Otherwise, it can only concern part of your property. Indeed, these heirs cannot be excluded from the succession. The law assigns them half of the assets in the presence of a child, two thirds for two children, three quarters from three children. If there is no descendant, the surviving spouse inherits a quarter of the deceased’s estate.
Only the residual fraction (called the available portion) can be freely allocated via the will. The bequest can be defined in different ways: it can be a fraction of your assets, a type of property (real estate, for example), or even a precisely designated property (such as an apartment, or such a gem).
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Return to normal for donations to cults
The extra boost has come to an end. Since June 2021, donations to worship have benefited from the tax reduction at the increased rate (75%). The gesture had been granted in the wake of the confinements which had greatly reduced the sums collected by the Church. As planned from the start, this device expired at the end of 2022. From now on, the faithful benefit from the reduction at the standard rate, of 66%.
This return to normal applies to donations to worship made in 2023. Payments from last year, which will be declared in the next tax return, are eligible for the increased reduction (75%). It is granted within the limit of €562 for the year 2022. Beyond this ceiling, the normal rate is applied.
Help for victims of domestic violence, which had benefited from a similar measure, has also regained the standard reduction since the end of 2022.