Making gifts of assets such as publicly traded securities, real estate, closely held business interests, or art and collectibles has long been a tax-efficient way for donors to meet their charitable goals. New proposed legislation may accelerate a shift towards using non-cash assets to fund philanthropy.
A new presidential administration often ushers in changes to tax law, and proposals initiated by the Biden-Harris administration could significantly impact how donors approach their charitable giving. Several laws passed in the last four years—including the Tax Cuts and Jobs Act (TCJA), the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act and the Consolidated Appropriations Act of 2021—provided tax incentives for gifts of cash and outright gifts to charity. By contrast, the Biden-Harris plan, and several bills recently introduced in Congress, provide greater incentives for gifts of appreciated assets.
On the income tax front, one proposal seeks to nearly double the income tax rate applied to sale of long-term capital gains assets for high-income earners. Currently, high-income earners pay a 20% tax rate when they sell assets held for longer than one year. Under the Biden-Harris plan, individuals who earn more than $1 million would incur a 39.6% tax rate (43.4% rate if including net investment income tax). While it is unlikely that Congress will nearly double the tax rate when high income earners sell long-term gain property, many lobbyists agree that Congress will increase the rates—resulting in significant tax savings for donors who gift assets to charity.
On the estate tax front, several proposals provide incentives to reduce assets during lifetime or to make gifts of appreciated assets to charity in a will or trust. For example, one proposal would reduce the federal estate tax exemption from $11.7 million to $3.5 million and raise the highest estate tax rate by 25%. Other proposals would require the payment of a tax on assets left to family members that have built-in gains exceeding $1 million. Gifts to charities, however, are excluded. Still other legislation is pending that would expand the types of charitable vehicles that can receive IRA gifts to include donor advised funds, charitable trusts, and charitable gift annuities. If passed, that legislation could help those seeking to reduce taxes on assets that had not been previously taxed.
If any of the proposed income or estate tax changes become law, then making gifts of appreciated assets could become a more effective way to support the charities and causes that matter most to you. Donors who make outright gifts of long-term appreciated assets get a double benefit of eliminating capital gains tax and being eligible for an income tax deduction. Partnering with the Trust can transform assets you have set aside for charitable purposes into a one-time gift or into a charitable vehicle that can be used for multiple generations. If you are considering making a gift of an appreciated asset, we have created guides for the most common types of assets we receive:
Like most charities, the Trust accepts gifts other than cash or marketable securities on a case-by-case basis. Please contact a member of the gift planning team or your philanthropic advisor to learn more. If you are considering making a gift to the Trust in your will, trust, charitable trust or IRA, sample language is available here. Our Establishing Your Legacy brochure describes various fund types and case studies.
As the giving landscape evolves, the Trust is here to work with our donors and their advisors in developing strategies that help you to achieve your charitable goals.
If you have any questions about giving appreciated assets or would like to learn more about our process, please contact Don Gottesman, Director of Gift Planning, at firstname.lastname@example.org or at 312-616-6141; Tim Bresnahan, Sr. Director of Gift Planning, at email@example.com or at 312-565-2832; or your philanthropic advisor.