How Charitable Giving May Help Prepare Clients for Tax Reform

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Tax reform is currently high on the list of priorities in Washington. It is unclear exactly how new legislation will unfold, but estate taxes and itemized deductions, including charitable deductions are all on the table. So it may be prudent for clients to maximize charitable deductions this year when the current tax policy is still intact.

You can take these two steps to help prepare your clients for tax reform:

1. Help clients choose the best giving vehicle to meet their goals

Each giving vehicle has different features and benefits and it’s important to help your clients select the best solutions to meet their needs. Read Schwab Charitable’s guide for ideas on how to start a conversation about their giving goals and the tax benefits of philanthropy.

2017 is a particularly good year to open a donor-advised fund account because tax rates are expected to go down in the future. Donors can receive an immediate tax benefit and then recommend grants from the account over time. Contributing to an account this year can help offset today's high taxes and possibly bypass future deduction limits. Donor-advised funds can either serve as a donor's primary giving vehicle or in conjunction with other solutions such as a private foundation, charitable gift annuity, or trust.

2. Help clients minimize their tax exposure and maximize their impact by donating appreciated assets

The vast majority of donors give via check or cash and don’t realize that it’s much more effective to contribute appreciated securities or non-cash assets. Identifying the most efficient assets for your clients to donate can help reduce taxes.

Contributing appreciated non-cash assets held for more than one year, such as securities, private stock or real estate are the most tax-effective gifts to donate. Clients not only receive an immediate tax deduction, but they potentially eliminate capital gains which means even more going to the charities they choose to support.

The benefits of contributing appreciated assets include:

  • The donor does not pay capital gains tax on the assets, so they potentially eliminate the tax hit and the charities of their choice may receive a donation that can be as much as 20% larger.
  • The donor may normally claim a charitable deduction of the full fair market value of the donated securities, up to 30% of adjusted gross income.
  • Amounts in excess of this 30% can be carried forward for up to five years.

Some of these contributions can take a while to process, so it makes sense for you to have ongoing conversations with your clients throughout the year to help them avoid rushed decisions and missed opportunities.

Helping clients’ have more impact with their charitable giving and maximize their tax benefits can differentiate an advisory practice in an increasingly competitive environment. Donor advised funds are a great way to achieve these goals because they charitable giving more efficient, convenient and tax smart.

Visit for more ways to deepen client relationships through philanthropy.

© Schwab Charitable

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