Why Charitable Giving Should Be Part of Your Financial Strategy


According to the National Philanthropic Trust, approximately 90% of high-net-worth households give to charity. On average, high-net-worth donors gave $29,269 to charity in 2017. And adults are more likely to give to charity if their parents gave to charity.

The Emotional Benefits of Giving Back

So why do people give back? In a Vanguard Charitable survey, respondents overwhelmingly said, “I believe my giving makes a difference in the world.” And according to a Charities Aid Foundation study, 42% of donors agreed that enjoyment was a key motivator to their giving. Studies have found that giving back can reduce stress, boost self-esteem, improve life satisfaction, improve physical health, foster social connections, create deeper family connections, and increase overall well-being and happiness.

The Financial Benefits of Giving Back

Charitable giving can be a valuable part of your tax and estate plan strategy. A gift could be money, property, or the use of property that you give someone without the expectation of receiving something back of equal value. Here are some ways giving back can have financial benefits:

Get an overall tax deduction. You can receive a tax deduction for the fair market value of your gift if you’re giving at levels above the standard deduction. Deductible contributions may include money or property you give to churches or other religious organizations; federal, state, and local governments; and nonprofit schools and hospitals.  

Minimize capital gains tax on appreciated securities. You won’t incur the capital gains tax when you donate appreciated assets to a 501(c)(3) public charity. If the charity doesn’t accept appreciated securities or mutual funds, you could use a donor-advised fund (DAF). A DAF is a charitable savings account that a donor can set up through a qualified institution — such as Schwab Charitable, Vanguard Charitable, and Fidelity Charitable — or other umbrella charities, such as community, single-issue, or religiously-affiliated organizations.

Reduce tax exposure from a financial windfall. Charitable donations can reduce your tax bill.

Reduce estate tax. Gifting appreciating assets can remove the future appreciation from your estate, reducing your overall estate tax.

Liquidate complex assets tax-efficiently. Complex assets can be hard to sell, but you could donate these assets in kind to a charity and have the charity liquidate them. You could also consider a DAF if the charity won’t accept these assets.

If you’d like to further explore your charitable giving options and how you can incorporate them into your financial strategy, reach out to us today.