FAQs: A snapshot of clients' tax-time charitable giving questions

Posted on February 23, 2024


The year is in full swing. Attorneys, accountants, and financial advisors are asking clients to start gathering tax documents and related paperwork for 2023 tax returns and 2024 planning. Now is a good time for advisors to review a few basic tax principles related to charitable giving. Explore three questions that are top of mind for many advisors, along with answers that can help you serve your clients.

1. How important is it to high net-worth clients to get a tax deduction for gifts to charity?

Among clients who own investments of $5 million or more, 91% of those surveyed reported that charitable giving is a component of their estate and financial plans. In another study, most affluent investors cited reasons for giving well beyond the possibility of a tax deduction and would not automatically reduce their giving if the charitable income tax deduction went away. What this means for your practice is that it's essential to be aware of your clients' non-tax motivations for giving, such as family traditions, personal experiences, compassion for particular causes and involvement with specific charitable organizations. Talking about charitable giving with your clients is also critical because most will likely consider it important.

2. Why do clients so often default to giving cash?

Many clients simply are not aware of the tax benefits of giving highly-appreciated assets to their Donor Advised Fund or charitable funds at Stark Community Foundation or other public charities. Even if they are aware, they forget or are in a hurry and end up writing checks and making donations with their credit cards. Advisors must remind clients about the benefits of donating non-cash assets such as highly-appreciated stock or complex assets (e.g., closely-held business interests and real estate). When clients give highly-appreciated assets instead of cash, they can often significantly reduce capital gains tax exposure and calculate the deduction based on the full fair market value of the gifted assets.

3. What are the basic deductibility rules for gifts to charities?

It's important to know that the deductibility rules are different for your clients' gifts to a public charity (such as a fund at Stark Community Foundation) versus their gifts to a private foundation. Clients' cash gifts to public charities are deductible up to 60% of AGI, versus 30% for gifts to private foundations. In addition, gifts to public charities of long-term appreciated stocks and property are generally deductible at fair market value up to 30% of AGI. In contrast, the same assets given to a private foundation are deductible at the client's cost basis up to 20% of AGI. This difference can be enormous in terms of dollars, so let your clients know about this if they are planning significant gifts to charities.

So what's the first step? Make it a habit to mention charitable giving to your clients and reach out to the team at Stark Community Foundation. Whatever your clients' charitable priorities, consider our team your behind-the-scenes back office and support department to handle all your clients' charitable giving needs.

To learn more, contact Bridgette Neisel, vice president of advancement, at bneisel@starkcf.org or 330-454-7992.

*This blog post is provided for informational purposes only, and is not intended as legal, accounting or financial planning advice.

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