Attorneys, accountants, and financial advisors are asking clients to start gathering tax documents and related paperwork for 2023 tax returns and 2024 planning. At CFAAC, we’re here to help answer questions on any charitable giving topic, ranging from tax deductibility to the advantages of giving non-cash gifts. Now is a good time for advisors to review a few basic tax principles related to charitable giving. Here are three questions that are top of mind for many advisors.

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 important 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. The bottom line: it’s critical to talk about charitable giving with all of your clients.

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 or other type of fund at the Community Foundation or other public charity. Even if they are aware, they often forget or are in a hurry and end up writing checks and making donations with their credit cards. It’s really important for advisors to remind clients about the benefits of donating non-cash assets such as highly-appreciated stock, or even complex assets (e.g., closely-held business interests and real estate). When clients give highly-appreciated assets in lieu of cash, they often can significantly reduce capital gains tax exposure, and they can calculate the deduction based on the full fair market value of the gifted assets.

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 CFAAC) and their gifts to a private foundation. Clients’ gifts to public charities are deductible up to 50% of their adjusted gross income, versus 30% for gifts to private foundations. In addition, gifts to public charities of non-marketable assets such as real estate and closely-held stock typically are deductible at fair market value, while the same assets given to a private foundation are deductible at the client’s cost basis. This difference can be enormous in terms of dollars, so be sure to inform your clients know about this if they are planning major gifts to charities.

Whatever your clients’ charitable priorities, consider our team to be your behind-the-scenes back office and support department to handle all of your clients’ charitable giving needs. Just contact us at  info@cfaac.org or 410.480.1102.