For many attorneys, CPAs and financial advisors, the tax law changes under the One Big Beautiful Bill Act are already familiar. For many clients, however, the implications are only now coming into focus, especially as tax season has highlighted practical questions. Even if you’ve been discussing these changes for months, this isn’t the time to stop. For many clients, this may be the moment when they’re finally ready to engage.
Key Charitable Planning Points to Discuss with Clients
1. Increased Awareness Creates an Opening for Conversation
- Mainstream media is increasing its coverage of charitable planning techniques. For example, the Wall Street Journal recently published an article about Donor Advised Funds (DAFs) as a tool for tax savings and community impact (subscription required to read).
- Many clients may not realize that Kalamazoo Community Foundation (KZCF) offers DAFs, along with other options for structuring a charitable giving plan that supports both personal values and pressing community needs.
- When clients ask about DAFs, KZCF can be a valuable resource.
2. New Deduction Rules Make Planning More Important
- Starting in 2026, a client’s qualified charitable deductions must exceed 0.5% of adjusted gross income before producing a tax benefit. This effectively raises the threshold for itemized charitable deductions.
- As a result, some clients may benefit from “bunching” charitable contributions through a DAF, front-loading donations into a single tax year to exceed the threshold.
- At the same time, a new “cap” provision limits the value of itemized charitable deductions for clients in the 37% federal income tax bracket to the 35% rate. In simple terms, depending on other factors, a $10,000 gift could generate a $3,500 tax benefit instead of $3,700.
- Taken together, the new floor and cap add complexity to charitable planning and make thoughtful, individualized guidance even more important.
3. Opportunities Still Exist for Both Itemizers and Non-Itemizers
- The new tax law affects not only clients who itemize, but also those who don’t. Non-itemizers are now eligible for an above-the-line deduction of $1,000 for single filers and $2,000 for joint filers.
- However, this deduction doesn’t apply to noncash gifts or gifts to DAFs. Since both can still play an important role in tax planning, this limitation is worth addressing in client conversations.
- It’s also worth remembering that donating appreciated stock held for more than one year is often more tax-efficient than writing a check. This strategy can help a client avoid capital gains tax on the appreciation, and clients who itemize may also claim a deduction for the full fair market value.
Please reach out to KZCF anytime. We know these tax law changes add complexity to your work, and we’re always glad to help point you in the right direction as you research options and advise clients. Just as importantly, you don’t need to begin every client conversation with technical details. Even simple conversations about philanthropy can strengthen client relationships and help grow your practice.
