Four Tax-Smart Strategies for
Charitable Giving in 2016
by Kim Laughton, President Schwab Charitable™
Donors who are strategic about their philanthropy can have an even greater impact on the causes
they support while also significantly reducing their taxes. Your financial advisor or accountant can
help you develop the best charitable giving approach for your situation, but here are four important
strategies everyone should consider this year.
Donate appreciated investments instead of cash
Many donors do not realize that charitable donations of appreciated investments are generally more
tax-efficient than cash. Publicly-traded and restricted stock, privately held shares (C-Corp, S-Corp,
and limited partnership interests), initial public offerings, real estate, and private equity and hedge
fund interests are among the most tax-advantaged gifts to charity. Contributing appreciated assets
to a public charity (including to a donor-advised fund account) may allow donors to eliminate capital
gains tax on the sale of those assets and thereby increase their giving by as much as 20%.*
Unfortunately charities do not always have the resources or capabilities to accept gifts of
appreciated investments directly. Donor-advised funds such as Schwab Charitable, on the other
hand, are well equipped to accept and process appreciated investments and assets. Almost
two thirds (63%) of contributions into Schwab Charitable accounts in 2015 were in the form of
appreciated assets.
Appreciated assets may be deducted at their full market value when they are contributed to a donoradvised fund and generally have no capital gains tax obligation. They are deductible each year up
to 30% of adjusted gross income and enjoy a 5-year, carry-forward provision for excess deductions.*
Reduce the size of your taxable estate
The federal estate and gift tax exemption is $5.45 million for each individual in 2016 but some states
levy their own estate and inheritance taxes. Currently, 15 states and the District of Columbia impose
an estate tax, and six states have an inheritance tax.**
Charitable donations can help reduce the size of a taxable estate and associated federal or state
estate tax liabilities. A donor-advised fund account can be included in a will or trust, and donors can
list donor-advised funds as beneficiaries of a retirement plan, life insurance plan, revocable or living
trust, or charitable remainder trust.
Take advantage of tax-free growth
Assets in a donor-advised fund account are invested for potential future growth or capital
preservation and the donor may recommend grants to their favorite charities at any time. At Schwab
Charitable, clients with larger accounts may select an independent investment advisor to manage
their assets. From Schwab Charitable’s inception in 1999 through June 30, 2015, cumulative
investment growth resulted in an additional $1 billion in funds available for charitable giving.†
Start planning your 2016 charitable giving now
Schwab Charitable enables donors to contribute appreciated assets or cash into their accounts
throughout the year, become eligible for tax benefits immediately, and then grant to the causes they
support when they feel the time is right. This means giving can be more strategic, and individuals
can focus on doing good without the pressure of an immediate decision.
Schwab Charitable handles all parts of the giving process so donors can focus on their charitable
goals. These steps include verifying the charities that clients choose, generating personalized grant
letters and checks on custom letterhead, keeping track of contributions and grants, and providing
an annual report at tax time. All of this information can be viewed conveniently on Schwab.com and
via the Schwab mobile app, where donors can also recommend grants with a few clicks.
Philanthropy is a powerful and rewarding exercise by itself. When it is planned and organized
effectively, it can become not only a meaningful, annual endeavor but also a very tax effective
strategy that can result in reducing your annual tax burden while also providing even greater
support to your charities of choice. Opening a Schwab Charitable account is a tax-smart way to help
streamline your philanthropic efforts and ensure that you are maximizing your well-considered and
much-needed donations.
Giving is good. Giving wisely is great.
Learn More
For more information or for a consultation about your specific philanthropic goals, please call us at
800-746-6216 or visit us at www.schwabcharitable.org.
* Assumes assets have been held for more than one year and that all realized gains are subject to the 20% federal long-term
capital gains tax rate.
** Source: http://taxfoundation.org/blog/does-your-state-have-estate-or-inheritance-tax. State tax laws vary and are subject
to change.
†
Past performance is no guarantee of future results.
Contributions of securities held for longer than one year are generally deductible at fair market value (FMV). Securities held
for one year or less have the same AGI limits as cash contributions (50%), but the valuation is based on the lesser of the cost
basis for FMV. Contributions that exceed AGI limitations may be carried forward and deducted for five years.
An account holder’s ability to claim itemized deductions depends upon the donor’s specific tax situation.
Schwab Charitable directly accepts contributions of appreciated investments and assets on a case by case basis. Certain
assets may be accepted through a charitable intermediary.
Professionally-managed accounts are available only through independent investment advisors working with Schwab Advisor
Services™, a business segment of The Charles Schwab Corporation serving independent investment advisors and including the custody, trading and support services of Charles Schwab & Co., Inc. Although donors may recommend an advisor,
Schwab Charitable Fund must approve the recommendation. Advisors must meet certain eligibility requirements and adhere
to Fund fee and investment guidelines.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where
specific advice is necessary or appropriate, Schwab Charitable recommends consultation with a qualified tax advisor, CPA,
Financial Planner or Investment Manager.
Schwab Charitable is the name used for the combined programs and services of Schwab Charitable Fund, an independent
nonprofit organization, which has entered into service agreements with certain affiliates of The Charles Schwab Corporation.
©2016 Schwab Charitable Fund. All rights reserved. REF (0416-1940) MKT91869 (5/16)
00166640