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Financial Planning > Tax Planning > Tax Reform

Half of Donors Have Changed Giving Strategy Since Tax Reform: Fidelity

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Tax reform has prompted many taxpayers to change the way in which they make charitable donations, Fidelity Charitable reported Tuesday.

Half of taxpayers in a survey reported that they had made at least one change in their charitable giving strategy since the new tax law went into effect, such as donating appreciated stock, “bunching” several years of charitable gifts into a single year or contributing to a donor-advised fund.

This was in line with previous Fidelity Charitable research that found 47% of advisors said their clients had adjusted their giving strategy in response to tax reform.

At the same time, 76% of taxpayers in the new survey said they had donated about the same amount to charity in 2018 as they had the previous year, and 15% gave more.

“It is encouraging to see that those with the most to give plan to continue to give generously in the years to come,” Tony Oommen, charitable planning consultant at Fidelity Charitable, said in a statement.

“While recent reports show that individual giving as a whole may have been slightly reduced by recent tax reform, we are glad to see the commitment to giving staying strong.”

W5, an independent research firm, surveyed 475 affluent and high-net-worth charitable donors who itemized tax deductions two of the last three years.

Twenty-two percent of surveyed millennials increased their charitable giving in 2018, compared with 16% of Gen Xers and 9% of baby boomers. Fidelity Charitable said millennials likely had reasons other than tax reform for increasing their charity, such as income growth or life stage.

Thirty-two percent of respondents who gave more than they had in 2017 cited a request from a nonprofit or involvement in a pledge or campaign. Thirty-one percent each said their increased was due to a salary increase or to interest in a charitable cause.

The survey found that 19% of taxpayers who said they worked with a financial advisor gave more in 2018 than in 2017, compared with only 7% of those who did not receive financial advice.

Of taxpayers who reported that they had given less than the year before, tax reform was far and away the chief reason, according to the survey.

The results showed that 32% of respondents were surprised about their tax situation after filing their 2018 returns despite having adjusted their giving strategy. Forty percent of boomers said they had been surprised, compared with 29% of millennials and 23% of Gen Xers.

Fifty-five percent of respondents who had been surprised reported that their situation was worse than expected, with 20% saying it was much worse.

“Both individual taxpayers and their financial advisors should examine their tax situations closely in light of recent reform to identify opportunities to maximize deductions through charitable giving,” Oommen said. “For those with a desire to give back, effective pre-planning is now more important than ever.”

— Check out Why Clients Decide to Donate Publicly or Anonymously on ThinkAdvisor.


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