Do You Have a Charitable Giving Strategy?

Like most people, you probably make charitable gifts each year to a number of causes, organizations and institutions, like Drexel University, that are important to you. But have you stopped to consider whether your charitable giving accomplishes everything it could?

There are numerous ways to use charitable gifts as tools to fulfill both your personal and philanthropic goals. Here are four simple questions you may want to discuss with your accountant or financial advisor as you consider your charitable giving for 2025:

1. Which assets should I use to make a charitable gift – cash or appreciated securities (stocks, bonds or mutual funds)? 
   
   Charities are always glad to receive gifts of cash, but if you own appreciated securities, consider making a direct donation of stock. The charity will sell the shares and, as a tax-exempt organization, will receive the full fair market value of the stock. Additionally, you’ll benefit from two types of tax advantages: you'll avoid the capital gains taxes you would incur if you personally sold the stock and then made a cash gift AND you'll also qualify for an income tax deduction for the full fair market value of the securities (regardless of what you originally paid for the shares), which can offset your federal, state and local income taxes if you itemize. 
   
   
2. What’s my limit for charitable deductions in a given year?
   
   For 2025, cash donations are limited to 60% of your adjusted gross income (AGI). For example, if your AGI for the tax year was $150,000, then your maximum cash donation deduction for the year would be $90,000 (60% of your $150,000 AGI). For donations of property held for more than one year (capital gain donations), the deduction limit is generally 30% of your AGI. However, if you make a large gift and have excess charitable deduction… it’s okay! The good news is that if you make donations that are not deductible because you have exceeded the AGI ceiling, the IRS allows you to carry the excess over for the next five years.
   
   
3.  Are there ways to incorporate my personal financial security into my long-term charitable goals?
   
   Yes! Life income gifts, such as charitable gift annuities (CGAs), can be structured to pay income to you and/or another person. A CGA will pay a fixed amount of income to the annuitant(s) for life, and the income payments will be partially income tax-free for a period of years. Income payments can be scheduled to begin right away or at some future date (such as a projected retirement date). When your CGA terminates, the remainder will go to the charity to support whatever purpose you choose. CGAs can be funded with gifts of cash, appreciated securities and, in some cases, donations of other types of property.
   
   
4. Which of my assets are best if I want to leave a legacy gift to charity?
   
   After their home, the second-highest-value asset owned by the average American is an IRA, 401(k) or other qualified retirement account. It’s critically important for you to name beneficiaries for these accounts. It’s equally important to review that list periodically as changes occur in your life, since retirement assets pass to the designated account beneficiaries regardless of who you have named in your Will.

However, keep in mind that retirement assets you leave to individuals (other than a spouse) will be heavily taxed. The IRS now requires most non-spouse beneficiaries who inherit from an original account owner to withdraw the entire amount over 10 years. This will be taxed as income based on the beneficiaries’ tax bracket, not yours. Because of this, charitable gifts of retirement plan and IRA proceeds have become a popular tax planning strategy. You can name a charity, like Drexel, as a primary or contingent beneficiary of all or part of your account, and 100% of the gift can bypass probate costs, estate taxes and income taxes that would otherwise apply to your retirement assets after your death. And including the charitable organizations that mean the most to you in your estate plans means that your support will continue long after your lifetime, which can be incredibly rewarding on a personal level.

Have questions? Contact David Toll, JD, senior associate vice president in Drexel’s Office of Gift Planning, at 215.895.1882 or giftplanning@drexel.edu.