The wealthy might be prompted to give more if the Biden administration aims for higher tax brackets.

President Joe Biden’s tax proposals might affect long-term charitable giving for the wealthy, possibly leading to an increase in giving.

“First, he wants to raise the top tax rate to 39.6%,” which would prompt donations, says Robert Karon, Minneapolis-based managing director at CBIZ MHM. “Second, [Biden] would increase the tax rate on long-term capital gains and dividends to 39.6% on income over $1 million. This would make some special gift vehicles like charitable remainder trusts and gift annuities more appealing.”

Biden also wants to cap itemized tax deductions for the wealthy, including for charitable donations.

To adapt to the changes, Karon says advisors could turn to things like private family foundations and charitable lead trusts for high-net-worth clients to make charitable contributions. Foundations have tighter donation limits than some donating tools, while charitable lead trusts use a formula of time, fair market value and compounding return to calculate growth for the trust beneficiaries while providing a regular and recurring donation to a charity, Karon says.

Donations of appreciated stock still generally make sense for wealthy taxpayers, says Kathleen Buchs, a CPA and director at MAI Capital Management in Cleveland. The donor gets a double benefit: a charitable deduction for the value of the stock and the ability to avoid recognizing the appreciation in value. That combination is especially good with today’s increased stock valuations, she says.

“Take an individual who donates $100,000 of publicly held stock held for more than 12 months with a zero-cost tax basis,” Karon says. “If that individual sold this stock, their tax cost would be 23.8% federal, or $23,800. You can deduct up to 30% of your [adjusted gross income] with appreciated stock. You get a 100% tax deduction for the fair market value of that stock and pay no tax on the appreciation.” Some high-tax-rate states offer more tax savings on big donations, he says.

Mary Kay Foss, a CPA in Walnut Creek, Calif., likes qualified charitable distributions, in which “gifts of up to $100,000 are made by someone over 70½ directly from their IRA. The qualifying gift erases the tax on an IRA withdrawal,” she says.

Foss also likes donor-advised funds, which can be established with many brokerage firms or a local community fund. “The taxpayer gets the tax deduction in the year the value goes into the fund, but charities receive their dollars when [the money is] distributed out of the fund,” Foss says. “This works well if you have a large liquidity event that increases income one year. This is also great for taxpayers who bunch deductions to take advantage of the enhanced standard deduction from 2018 to 2025.”

A donor-advised fund can make gifts similar to those of a private foundation without the record-keeping, tax returns, publicity and excise taxes, Foss adds.

Looming changes that might curtail tax benefits for the wealthy may inspire those clients to give more, says Clay Stevens, director in strategic planning at wealth management firm Aspiriant. “The increase in the estate tax exemption, which doubled in 2017, caused many who otherwise might gift to charity at death to avoid such tax to instead gift more to their family and less to charity,” he says. If this exemption is decreased, as Biden plans, it could mean more estate gifts are redirected to charities.