Tax reform, which will limit deductions for income tax purposes for 2018, may have helped push charitable giving to dramatic new highs during 2017, according to Schwab Charitable, a donor advised fund.
Donors set up 12,100 new accounts during 2017, but 7,400 of those accounts were opened in December alone. There was also a 91 percent increase in the number of new accounts in the last six months of last year compared to the same time period in 2016.
The number of grants distributed from the accounts also increased by 35 percent to 368,000 for last year, for a total of $1.6 billion in grants. The total distributed in grants has tripled since 2011, the annual report said.
In addition to the tax changes, other factors that may have been behind the increases are the strong market conditions and the need during last year for disaster relief from floods and fires in the United States.
“A combination of factors created a one-of-a-kind giving environment last year,” said Kim Laughton, president of Schwab Charitable. “The changes to the tax code this year have made it even more important for donors and their financial advisors to plan giving over several years in order to fulfill their personal philanthropic mission and make the most of tax deductions at the same time.”
Many of the deductions, including those to charities, that people traditionally itemized have been eliminated or reduced under the new tax code. In exchange, the new standard deduction has been nearly doubled to $12,000 for an individual. Through a donor-advised fund, the donor can set aside a large sum for charity and receive the deduction, and then make grants from it to charities in future years. The donor can itemize deductions in the big contribution years and then take the standard deduction in other years.
Other findings in the report show that more than 70 percent of the contributions into Schwab Charitable accounts last year were highly appreciated, non-cash assets, such as publicly traded securities, restricted stock and real estate. By giving these assets to charity, donors were able to avoid capital gains tax, which means potentially even more funds going to the causes they support, Schwab Charitable said.
Schwab also noted that donors expanded their giving priorities last year in response to the unprecedented natural disasters, as well as a changing political environment, and the needs of America’s most vulnerable citizens. Feeding America, the Red Cross, Planned Parenthood, the Salvation Army and Doctors Without Borders were among the most widely supported charities in 2017.