A number of critical issues are converging in ways that may create the best environment for fundraisers since 2007. Economic, demographic, and tax policy factors are all moving in a direction that is positive for charitable giving in America. According to Federal Reserve figures, net household wealth in America is at an all-time high. The ongoing economic recovery has seen unemployment figures drop as real estate, stocks and other investments have been increasing in value. Historically, improving economic conditions provide a boost in charitable giving.
The Baby Boomers Are Giving More to Charity Than Any Other Generation
Demographic trends also bode well for philanthropic activity. With Baby Boomers ranging in age from their early 50’s to late 60’s, the majority are in their peak earning years, and according to published reports, Boomers are currently giving more to charity each year than any other generation. At the same time, according to the U.S. Census, the 85+ population group is the fastest growing segment of the population. Traditionally the bulk of charitable gifts that occur at death come from this group. In fact, according to Federal Estate Tax returns, more charitable bequests come from persons dying over the age of 90 each year than all of the charitable bequests from persons dying below the age of 80. The growing pool of people in the third stage of life should provide a significant boost to the pool of traditional planned gift prospects.
Current Tax Policy Supports Charitable Giving
From a tax policy point of view the current environment is very positive for charitable gifts during life and afterwards. The American Tax Payer Relief Act extended the Bush tax cuts for the vast majority of tax payers, thereby preserving existing tax incentives for those who benefit from itemizing their gifts for tax purposes. These donors provide the majority of charitable gift dollars according to Giving USA Estimates. The current tax law also increased the income and capital gains tax rates for America’s most affluent taxpayers. As a result their charitable gifts may actually “save” more in taxes than in recent tax years. Meanwhile, talks have begun again about possible future tax reforms which could reduce or eliminate tax incentives for charitable gifts. This means that the existing tax treatment for charitable gifts may be more attractive now than in the future.
In summary, conditions have converged that create an environment that is more favorable for philanthropic planning than it has been for years. Those who understand these factors and act accordingly may well see record levels of charitable gifts in 2014 and beyond.