Tax Reform and Charitable Giving in 2018

By David Snow, Community Foundation Director of Campaigns

Learn how the new tax laws affect charitable deductions for donors.

On December 20, Congress enacted the Tax Cuts and Jobs Act of 2017, ushering in the most far-reaching changes in the federal tax code in more than three decades. In addition to rate cuts, a number of widely-used deductions, credits and adjustments were repealed or reduced. The good news is that the charitable deduction survived the process and was even enhanced for some donors.

It is too soon to predict what impact this legislation will have on charitable giving. Except for increasing the deduction ceiling on cash gifts from 50 percent to 60 percent of Adjusted Gross Income and retaining the 5-year carry-over, the effect on charitable giving is more indirect.  

However as Sean Stannard-Stockton writes in the “Stanford Social Innovation Review”, “The idea that people give because they need a tax break is widely believed, but is completely disingenuous.” He adds, “I am not saying that taxes have no effect on donations. Taxes often drive the timing of gifts.”

With that in mind let’s look at tax reform and charitable giving in 2018.

Some highlights:

  • The existing seven tax brackets remain, but most individual tax rates are lowered so many will pay less in taxes. This provides  the opportunity to give more to charitable organizations such as Wesley.
  • The standard deduction nearly doubles to $12,000 for single filers and $24,000 for joint filers, so some may now have an incentive to give more to charity in 2018 to exceed the standard deduction and itemize their deductions.
  • With the stock market at all-time highs, donors can still avoid capital-gain taxes by giving appreciated securities owned for more than a year, a key part of the tax law that has not changed. This could present a more beneficial opportunity than ever.
  • Those over the age of 70-1/2 who have not yet taken the required distribution from their IRA can ask their plan administrator to make a direct tax-free transfer to a charity, such as Wesley, since the ability to make such transfers was not affected.    

Despite these new changes, Stelter, Wesley’s strategic partner for not-for-profit planned giving, reports that, “through every study that we and others have commissioned, the primary reason for making a planned gift remains rooted in the love and passion for the mission – tax incentives are always at the bottom of the list.”

To receive a copy of Stelter’s reference guide on Tax Reform & Charitable Giving, please contact Wesley Community Foundation at 206-870-1334.