How It Works

Savings bonds are normally taxed when they're cashed in, reissued to another person or reach final maturity. Fortunately, you can reduce, or even eliminate, income taxes when you choose to leave your bonds to the El Dorado Community Foundation. Although the bonds themselves can't be directly donated to a charitable organization during your lifetime, there are three smart strategies that allow you to use your bonds to support our mission.

Did you know?

Even though U.S. savings bonds offer steady return and absolute security, redeeming them can cause tax headaches. But you can save on taxes by using your bonds to support our cause.

Three Charitable Options

• 1. Redeem your savings bonds and use the cash to make a gift to us. The redemption will trigger a tax liability to you on the interest income, but if you itemize, you will receive the benefit of a charitable tax deduction to help offset the additional taxable income.
• 2. Leave the bonds to us through your will. Because we are a tax-exempt organization, we will receive the full value of the bonds, which could have otherwise been reduced by up to 35 percent for income taxes. For a small percentage of people, federal estate taxes* might also reduce the amount available.
• 3. Leave the bonds upon your death to a charitable remainder trust. They will first benefit your selected loved ones with lifetime payments, and then the balance will support our mission.

Case in Point

Steve leaves $10,000 of U.S. savings bonds to his daughter, Becky, upon his death. Becky is in the 35 percent income tax bracket, so she receives only $6,500 ($10,000 - $3,500) after she pays the income tax on the bonds. If Steve were to leave the bonds to us instead, we would receive the entire $10,000 because we are a tax-exempt organization.

*Currently federal estate taxes are repealed for all deaths that occur in the calendar year 2010. In 2011, estate taxes are scheduled to be reinstated for estates worth more than $1 million at rates up to 55 percent. Congress, however, may address reinstating estate taxes before 2011. What the final legislation will look like and when it might become effective is unknown at this point.