This year is turning out to be record year for charitable donations. Fidelity Charitable, a donor-advised fund, reported a record $2.3 billion deployed through the third quarter, which represents a 15% increase from the same period last year. Altogether 489,000 grants were made to more than 90,100 nonprofit organizations.
Schwab Charitable reported a 22% increase in donated funds from the year-ago period, totaling $830 million distributed through 145,000 grants.
The growth in giving reflects several factors, according to Schwab:
Appreciation of Assets
The S&P 500 (SPY) gained 6% during the first three quarters of this year, while the iShares MSCI Emerging Markets ETF (EEM) soared 17%. If an asset has been held for more than one year, the donor can claim the full fair market value without having to pay any capital gains tax on the transfer. As a result, donors can give up to 20% more to a charity than if they had first sold the asset and then donated the proceeds to charity. The greater the value of the donation the bigger the offset to taxes.
Concerns About Tax Policies of Next Congress and President
Legislation to cap itemized deductions, lower the estate tax exemption and/or increase estate tax rates could impact the tax benefit value of charitable donations.
Hillary Clinton, the Democratic presidential candidate whose odds of winning the election are currently 85% or higher, according to the polls, has proposed several new taxes on high earners including an additional 4% tax on individuals earning $2.5 million or more (or $5 million for couples), a minimum effective tax rate of 30 percent for those earning $1 million or more, a higher capital gains rate on appreciated assets held six years or less for the those in the top two tax brackets and a hard limit on the value of deductions (outside of charitable contributions).
