How charitable giving in 2017 may help prepare your clients for tax reform

How charitable giving in 2017 may help prepare your clients for tax reform

How charitable giving in 2017 may help prepare your clients for tax reform

It is unclear exactly how new legislation will unfold, but tax reform could go into effect as early as 2018. Possible changes to itemized deductions including charitable deductions, and estate taxes are all on the table. So it may be prudent to maximize charitable deductions this year when the current tax policy is still intact.

To help guide your clients through this period of uncertainty we recommend talking to them about their giving goals and helping them understand the significant tax benefits of philanthropy. Choosing the most efficient giving vehicle and donating appreciated, non-cash assets are two ways to make a bigger difference in the world while reducing tax liability.

2 steps to prepare your clients:

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

2017 is a particularly good year to open a donor-advised fund account before tax laws change. Since tax rates are expected to go down, contributing to an account this year can help offset today's high taxes and possibly bypass future deduction limits. Donors can receive an immediate tax benefit and then recommend grants from the account over time.

Donor-advised funds like Schwab Charitable make charitable giving more efficient, convenient and tax smart, which enables donors to maximize the impact of their philanthropy. They can either serve as a donor's primary giving vehicle or in conjunction with other solutions such as private foundation, charitable gift annuity, or trust. Each vehicle has different features and benefits—help your clients select the best solutions to meet their needs.

Consult our guide for 7 tips to introduce philanthropy into financial planning discussions.

Visit for more ways to deepen client relationships through philanthropy.

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 tax effective to contribute appreciated securities or non-cash assets. Help identify the most efficient assets for your clients to donate and thereby 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.

Benefits of contributing appreciated assets:

  • 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.

Case Study: Impact of donating private company shares directly to charity

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.

Contact your Relationship Manager or call Schwab Charitable at 800-746-6216 to discuss how charitable planning can help you differentiate your service and build deeper client relationships.

If you're thinking about becoming an independent advisor, consider a custodian who invests in your success. Contact us to learn more about the benefits of a custodial relationship with Schwab.