Let's Talk Taxes

Date: April 2, 2024

It is a common misconception that people give to charity for the tax benefit.  In fact, a recent study by Charities Aid Foundation found that 96% of people give because of personal values: a sense of morality and ethics.

Almost every donor interviewed (more than 700 throughout several countries) identified a certain cause they were passionate towards and for 75% of those surveyed, this connection is what motivated them to give. 

Faith and religion play a huge role for many when it comes to giving.  According to Giving USA’s most recent report, “religious” was the #1 recipient of all non-governmental giving in 2022, receiving 27% of all funds donated.  Education was the closest runner up, receiving 14% of donated funds.

Personal experiences are listed as the last motivating factor to give, with 61% of people interviewed citing either something that happened in their past, making them want to “pay it forward,” or a desire to leave a positive legacy. 

Note that “tax benefits” did not make the top 4. 

Indeed, nonprofit professionals know all this about their donors and therefore spend most of their time working on messaging, campaign materials, and donor stewardship.  

What most nonprofit professionals are NOT spending time on is increasing their level of knowledge on current tax environments and the opportunities they create for their donors to connect with their personal values, have a greater impact in their areas of passion, fulfill faith or religious beliefs, and accomplish their life goals.  

Over the next few weeks, Broad Oaks Consulting will publish a series of blogs to help nonprofit professionals, wealth advisors, and nonprofit Board members better understand the tax environment we’re in, the opportunities currently available (but expiring soon), and the questions we should be asking of ourselves and our donors/clients. 

Why is this important?

Of the time nonprofits spend on fund development activities, most of their efforts and employee resources are devoted to soliciting gifts of cash.  What they fail to see is what they are leaving on the table.  For most people, only about 3-5% of their total assets are held in cash.  This makes sense.  Think about it.  

If someone were to ask you, “What’s your biggest asset?” you would most likely respond, “my house.” (It is up for debate whether your home should be considered an asset or a liability, but it remains the most common response.) 

The next largest asset for most people is their retirement savings.  Other assets that may outweigh cash on hand could include investable assets (stocks, bonds, mutual funds), a permanent life insurance policy, annuity, donor advised fund, or any other tangible property.  

In essence, by focusing on cash gifts now, we leave many opportunities untapped to both educate our donors/clients, and benefit the organizations and causes about which they care.  

Why do nonprofits do this?

While the nonprofit sector represents the 3rd largest workforce in the United States behind retail and manufacturing, 92% of nonprofits operate on a budget of less than $1MM a year, making it cost prohibitive to hire and retain qualified staff with a high level of acumen around non-cash gifts like appreciated securities, real estate, art, or other tangible property; planned gifts like CRTs, lead trusts, annuities, and insurance; let alone a firm grasp on state and federal laws governing such gifts.

In addition, most development professionals play multiple roles in the organizations they serve and do not feel confident enough in their knowledge or skills set to have these deeper, more intimate conversations with their donors.  Most have never been offered any type of additional training or connected with resources that can help them.  

We’re here to correct that.  So, where do we begin?  

The 2017 Tax Cuts and Jobs Act (TCJA)

To lay the foundation for the opportunity discussion to come, we must first understand the TCJA.

As Thomas Self and Betty Scheid point out in their article “Preparing for the Tax Cuts and Jobs Acts Sunset,” the TCJA “made sweeping changes to the tax code that affected both business and individuals. The TCJA lowered both corporate and individual income tax rates, almost doubled the amount of the standard deduction, and expanded the amount of the estate and gift exclusion from $5.6 million to $11.18 million, indexed for inflation after 2018.”

If you’re reading this thinking “tax jargon, tax jargon, tax jargon,” let us break it down for you:

The Standard Deduction

The Standard Deduction is where we first need to focus our attention. Deductions (including charitable donations, mortgage interest, college savings plans, etc.) are what help reduce taxable income and allow people pay less in taxes to federal, and often state, governments.  Most people prefer to pay less in taxes. Some feel the U.S. Government is the best steward of their resources and may even donate directly to the U.S. Government (please note the U.S. Government does not accept gifts of cryptocurrency). 

Chances are, your donors/clients are not looking for ways to give more money to the federal government and would rather see the nonprofits they support and believe in put their resources to good use.  Therefore, the TCJA is important to them, and should be important to you.

People give because they care about the good work being done, but they are also taking the deduction on their taxes, if it applies to them. 

Here’s the challenge: The TCJA nearly doubled the standard deduction for individuals from $6,350 in 2017 to $12,000 in 2018. For married couples filing jointly, the deduction rose from $12,700 in 2017 to $24,000 in 2018. For 2024, the deductions are $14,600 and $29,200, respectively. 

Because the standard deduction rose, it’s possible your donors/clients no longer itemize.  

Wealth Managers will know if their clients itemize, and if you are nonprofit professional, simply ask your donors, “Just out of curiosity, do you itemize or take the standard deduction?”

If you’re afraid of asking the question, walk yourself through your fears.  Most gift officers are afraid to ask for two reasons: 

  1. What if they offend the donor? 
  2. What if the donor asks a follow-up question they don’t know the answer to?

Allow me to allay your fears:  Worst case scenario your donor will either reply, “Why do you ask,” or “That’s none of your business.” Most will just answer the question.

Remember what your role is in your donor’s life.  Your role is to be the conduit between the donor and the organization you represent and help them make the best, most tax-efficient gifts to charity possible.  You are, in essence, their philantrhopic advisor.  

Here’s how I respond to either of the above:

“I only ask because I was recently preparing my own taxes and had an interesting conversation with my CPA.  For people who are charitably inclined, the Tax Cuts and Jobs Act of 2017 created some great tax incentives to give, but it only applies to people who itemize.  Those incentives will sunset next year.” 

If you didn’t recently speak with your CPA about this, be fully transparent and say, “I’m only asking because I recently read an article online that said for people who are charitably inclined….”

[Hint: Anyone giving more to charity (yours and any other causes about which they care) than the standard deduction is probably someone you should be having this conversation with.] 

Charitable Deduction Limits

Now that you know whether your donor itemizes and can take advantage of charitable giving from a tax perspective, what else do you need to know? 

When it comes to deductions, it’s not “one for one,” meaning that a donor gives a dollar and can deduct a dollar from their taxes (it actually was in 2020, but that was a special year).  There are limits. Let’s look at the two most common gifts to charity.  

In general, qualified donations of cash to charity are limited to 60% of AGI (adjusted gross income).  Deductions for contributions of long-term capital property (appreciated securities, insurance policies, real estate, art, etc., held for more than one year) are limited to 30% of AGI.

But wait!  There’s more! And this is where the TCJA becomes critical…

Prior to 2017, higher income earners (single filers with an AGI above $266,700 or joint filers with AGIs above $320,000) often experienced an additional limitation to the limitation above, thanks to what’s known as the PEASE limitation. 

What the heck is the PEASE limitation?

Before the enactment of the TCJA, there was an overall limitation to itemized deductions, including charitable deductions, often referred to as the “PEASE limitation” that could reduce itemized deductions by up to 80% for higher income taxpayers.  

Imagine this in practical terms.  Your donor/client and spouse work hard and earn a good living.  They are kind, charitable, and compassionate. They give generously because they care, but also to take advantage of the tax code so that more of their resources support good, effective organizations, only to discover when they file, those “advantages” don’t fully apply to them.

We have good news!  The last 5 years have been good to them! The TCJA temporarily eliminated the PEASE limitation, “thereby allowing full deduction of itemized deductions regardless of income levels.” This includes charitable deductions.

We all know that most people do not give primarily for tax incentives, but isn’t a tax incentive a nice bonus when it comes to giving?  It empowers your donor/client to give more to organizations and causes they believe are doing good work, placing their hard-earned resources in the hands of people they trust to make the world a better place. 

What now?

Next month we will dive into the SECURE Act and how, combined with the TCJA, a unique asset repositioning and giving opportunity was created.  This strategy will be particularly attractive to people who hold low cost-basis, long-term held securities.  

In the meantime, be thinking of who on your file may fall into the category of people who have just 21 months left to take advantage of this temporary elimination.


  1. Who is earning more than $266,700 as an individual or $320,000 jointly?
  2. Who is giving more than $14,600 as a single taxpayer or $29,200 as a joint filer? 
  3. Who has a concentrated position of low-basis stock? 

(Disclaimer: Neither Broad Oaks Consulting nor Angela Burgess is a CPA, attorney, or licensed wealth advisor/wealth manager.  The above is neither a recommendation nor tax advice, but rather a practical summary and observations of studies.  Organizations and individuals should consult with their own tax and legal advisors before making any financial decisions.)  

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