News & Events

2017 – the Year for Charitable Giving

-by Jason Archambault, CFP®, CPA/PFS, Managing Member

As we approach the end of the year, strong markets and possible tax reform may trigger the biggest charitable giving year in U.S. history.

Charitable GivingAn improving economy and strong market performance have generated significant appreciation of investment assets.
The S&P 500® stock market index has risen more than 60% in the last five years¹. Because of healthy gains in investments, many investors may face higher tax bills this year. Donating appreciated investments that have been held for more than one year to charity can help offset these taxes. Contributing appreciated investments to a donor-advised fund or another public charity has a number of benefits.

When an investment is donated, the donor avoids paying capital gains tax which can increase their charitable giving as much as 20%, depending on the donor’s tax bracket. Donors can generally claim a charitable deduction for the full, fair market value of the donated securities up to 30% of adjusted gross income.

Future tax reform legislation could reduce the tax benefits of charitable giving.
Proposed changes in the recent tax bill could reduce the marginal tax rate and increase the standard deduction. Although the itemized charitable deduction will likely be protected in some way, any reduction in income tax rates could lower the value of charitable deductions.

To provide maximum support for your favorite causes, you may be interested in a donor-advised fund to increase your charitable giving this year to realize certain tax benefits.

Utilizing a donor advised fund
A donor-advised fund is a charitable giving vehicle that allows a client to separate their tax strategy from their giving strategy. Since a donor-advised fund is an independent public charity, you may receive an immediate tax deduction and avoid capital gains tax when appreciated assets are contributed into the account. Funds in the account can be invested for potential growth, and grants can be made to charities of choice at their convenience.²

A donor-advised fund may be especially useful this year if you have appreciated concentrated assets or have experienced a recent liquidity event.

Let’s Have a Conversation
Our role at SKWealth is to provide you with ideas and solutions to help you give back to causes you care about in the most tax efficient manner. Please give me a call at 401-331-1575 to have a conversation.

1 Based on the monthly closing price, adjusted for dividends and splits, from September 1, 2012 to September 1, 2017
2 Source: Schwab Charitable Fund, 2017
A donor’s ability to claim itemized deductions is subject to a variety of limitations depending on the donor’s specific tax situation. Contributions of securities held for longer than one year are generally deductible at fair market value (FMV); securities held for one year or less have the same AGI limits as cash contributions (50%), but the valuation is based on the lesser of the cost basis or FMV. Contributions that exceed AGI limitations may be carried forward and deducted for five years. An account holder’s ability to claim itemized deductions may be subject to further limitations depending upon the donor’s specific tax situation and account holders should consult their tax advisors. 
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice.