The year is in full swing. Your attorneys, accountants, and financial advisors are asking you to start gathering tax documents and related paperwork for 2023 tax returns and 2024 planning. Now is a good time to ask them the basic tax principles of charitable giving. Here are three questions to ask your advisors:
I typically just write a check or donate cash. Is there a better way to contribute in 2024?
Cash is king until you consider the benefits of gifts of non-cash assets. Donations of non-cash assets such as highly-appreciated stock, or even complex assets (e.g., closely-held business interests and real estate), make a larger impact on your bottom line as well as the nonprofits. When your give appreciated assets in lieu of cash, you can significantly reduce capital gains tax exposure, and take the charitable deduction based on the full, fair market value of the gifted assets.
What if tax deductibility isn’t that important to me?
You're in good company. Non-tax motivations for giving, such as family traditions, personal experiences, compassion for particular causes, and involvement with specific charitable organizations play as big of a role in why donors give as tax avoidance. 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 are the basic deductibility rules for gifts to charities?
It’s important to know that the deductibility rules are different for gifts to a public charity (through a donor advised fund at Waco Foundation) on one hand, and gifts to a private foundation on the other hand. Gifts to public charities are deductible up to 50% of AGI, 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 make sure you consult your advisors is you are planning major gifts to charities in 2024.
Reach out to Planned Giving Director Jamie Goble! We
really mean it. Make it a habit to mention charitable giving to your advisors when you meet with them.
Whatever your charitable priorities, consider our staff to be a resource for your charitable giving.