Brenda Vingiello, Sand Hill’s Chief Investment Officer, joined Squawk Box to discuss her thoughts on the latest market trends and market outlook for 2025. This
Will Tax Reform Be Charitable to Philanthropists?
Published Date : May 2, 2017
With Republicans controlling both the White House and Congress, there is an increased likelihood of tax reform legislation hitting the debate floor. Proposals by President Trump and the House Ways and Means Committee appear to support the reduction of marginal tax rates and modification of itemized deductions which will mute the taxable benefits of gifting to a certain extent. This latest version does, however, protect the charitable tax deduction. It is hard to know when, or if, proposed changes will come to pass, but should tax reforms take effect next year, some donors may want to front-load charitable gifts in 2017 to maximize their tax benefits.
Taking into consideration your personal financial picture, there are several ways to effectively donate to charity.
· Direct Giving – Donating cash or stock to a qualified organization may entitle you to a charitable deduction against your gross income in the year in which it is given if you itemize deductions. If the contribution exceeds the allowable deduction, it can be carried over for five years. Transferring appreciated stock held more than one year to charity will also allow you to avoid the capital gains tax on the profit.
· Charitable Remainder Trust (CRT) – This vehicle allows you to convert a highly appreciated asset into a lifetime income. Transfer shares of stock to a CRT and take an immediate partial charitable deduction. The stock can then be sold within the trust and not be subject to tax now or estate tax when you die. Additionally, you will receive an annual income stream until your death at which time the charitable organization designated in the trust receives the assets. You can even reserve the right to change the charitable beneficiary of the CRT after it is formed, should your charitable preferences change.
· Donor Advised Fund (DAF) – The donor receives an immediate tax deduction and avoids capital gain on long-term appreciated securities when the gift is made to a DAF. The money is invested and future gains are sheltered from taxation. Grants can be recommended to qualified organizations to be paid out of the DAF, which allows the donor to get an up-front charitable deduction and make distributions to charitable organizations in later years.
· Qualified Charitable Distributions (QCD) from IRAs – If you are over age 70 ½, you can make a direct gift from an IRA up to $100,000 per year to a qualified charity. While no charitable deduction is allowed for these distributions, neither are they part of the donor’s adjusted gross income (AGI). They also qualify as part of your required minimum distribution (RMD) from the IRA for the year in which they are made. Keep in mind that only public charities are eligible to receive these tax-free Qualified Charitable Distributions ruling out private foundations, donor-advised funds and split-interest charitable funds.
Even if any of the proposed tax reforms become reality, there are still compelling reasons to make charitable donations. If capital gains rates remain unchanged, you would continue to benefit from the avoidance of paying that tax on appreciated stock that is donated to charity. It is also important to note that while financial benefit of tax deductions associated with charitable giving is a consideration, surveys indicate that the desire to make a difference and personal satisfaction are the main motivators in giving rather than tax benefits.
If you would like to learn more about these and other charitable options, please contact your Wealth Manager, accountant or estate planning attorney.
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
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