The Short Answer19th Hole Financial uses charitable LLC planning for capital gains and estate planning: owners of highly appreciated assets who also have charitable goals and want to keep control over how and when those assets are used. It is not used as a way to create an income tax deduction.
What Is A Charitable LLC?
A charitable LLC is a limited liability company you form, fund and manage, with a charitable purpose written into its plan. Because it is an ordinary LLC, it can hold almost any asset, invest it, and make grants to charities on your schedule. Its income is reported on its owners' returns: an LLC with two or more members is taxed as a partnership by default, and a single-member LLC is disregarded. Charitable tax rules come into play when the LLC, or you, give to a qualified charity. Putting assets into your own LLC is a contribution to your own company, with no charitable deduction at that point.
How Is It Different From A Foundation, Donor-Advised Fund Or Charitable Trust?
- Donor-advised fund: once you contribute, the sponsoring charity has legal control of the money. You keep advisory privileges over the grants.
- Private foundation: must make yearly charitable distributions based on 5% of its assets not used for charitable purposes, and pays a 1.39% excise tax on its net investment income.
- Charitable remainder trust: pays you or your family between 5% and 50% of its value each year, and the amount left for charity must be at least 10% of the starting value. The trust itself is exempt from income tax, so it can sell an appreciated asset and reinvest the full proceeds.
- Charitable LLC: you keep control, privacy and flexibility over timing. Charitable deductions arrive later, when the LLC or you make gifts to qualified charities.
These structures are often combined. The right mix depends on the asset, the timeline and how involved the family wants to be.
What Does Selling An Appreciated Asset Cost In 2026?
For a Californian, the tax on a large gain stacks three layers:
- Federal capital gains: 20% on long-term gains once taxable income passes $613,700 for married couples filing jointly ($545,500 single).
- Net investment income tax: another 3.8% once modified adjusted gross income passes $250,000 joint ($200,000 single). Those thresholds are not indexed for inflation.
- California: capital gains are taxed as ordinary income, at up to 12.3% plus a 1% surcharge on taxable income over $1 million.
Applied at the top rates, 23.8% federal plus 13.3% California comes to 37.1%, or about $1.86 million on a $5 million gain. Planning the gift, the sale and the estate together is how that number gets managed.
How Do Charitable Gifts Of Appreciated Assets Work?
When you give long-term appreciated property, such as stock held more than a year, to a qualified public charity, the deduction is generally its full fair market value, including the growth since you bought it. That deduction is limited to 30% of your adjusted gross income for the year, and any excess carries forward for up to five years. A deduction over $5,000 for property other than publicly traded securities requires a qualified appraisal. A charitable LLC can hold appreciated assets until the family decides when, and to which charities, they go.
How Does A Charitable LLC Fit Estate Planning?
In 2026 each person can pass $15 million free of federal estate tax, and that amount is indexed for inflation from 2027. Amounts above it are taxed at up to 40%. The full amount of bequests to qualified charities is deducted from the taxable estate. A charitable LLC gives the family a structure to decide, over years, what goes to charity and what goes to heirs, with the next generation involved in running it. Your estate attorney drafts the documents, and Tyler coordinates the plan with them and your CPA.
Who Is A Charitable LLC Right For?
- You hold a highly appreciated asset such as a business interest, real estate or concentrated stock
- You have real charitable goals and want your family involved
- You want to plan the capital gains and the estate at the same time
Is A Charitable LLC A Tax Deduction Strategy?
Some promoters market charitable structures mainly as a way to generate large income tax deductions, and those arrangements draw IRS scrutiny. Tyler does not use the charitable LLC that way. The structure is designed with your attorney and CPA around capital gains and estate goals, and the details are specific to each client.
Common Questions
Does a charitable LLC give me a tax deduction?
Tyler does not use a charitable LLC as an income tax deduction strategy. It is used for capital gains and estate planning, designed with your attorney and CPA.
Is a charitable LLC tax-exempt?
A charitable LLC is a regular taxable LLC, so its income is reported on its owners' returns. Tax-exempt status belongs to the qualified charities it gives to.
Can I change which charities receive the money?
Yes. The LLC decides when and where to give, so the family can change charities, timing and amounts as its goals change. Each gift is deductible only when it goes to a qualified organization.
