I’ve been having more conversations lately with clients about charitable giving. While I have found many to be very generous in their charitable giving, the uptick in conversation is likely due, at least in part, to an overriding concern about a lack of civility in the world. Yet, while specific giving opportunities have arisen recently and the desire to give exists, there seems to be a lack of understanding on how best to do so.
A capital campaign, unlike solicitations for general donations, tends to attract more interest from donors due to the more permanent nature of what the money is being directed towards. Whether it is to build an endowment or a building, the funds are perceived to have a lasting quality to them.
Capital campaign gifts tend to be larger than general donations. Sometimes, this is because with larger gifts comes naming opportunities. Other times, it’s because the specific use of the funds appeals to the donor.
The recent change in the tax law and the run up in the stock market over the past nine years have created an interesting opportunity for those wishing to give to charity; in particular those wishing to make larger gifts, such as to a capital campaign.
Beginning with the 2018 tax year, increases in the standard deduction and reductions in the amount of allowable itemized deductions is expected to result in 90% of all taxpayers taking the standard deduction on their Federal income tax return. What this means is that many people will no longer receive an income tax deduction for making charitable donations. Only in those years when the amount of charitable giving is quite large will it result in a tax deduction.
A large gift to a capital campaign in one year, for example, may result in a tax deduction for that year.
The stock market bottomed out in March, 2009. From that point on, the market has gone up tremendously. This has created a situation where investors are sitting with investments that contain large amounts of unrealized gains that if they sold those investments they would pay a significant tax. The easy answer is to continue to hold on to these investments.