POWERFUL GIVING

The truth about tax reform

Despite recent legislative changes, the incentive to give remains.

POWERFUL GIVING Much has been said in recent months about tax reform’s potential to reduce the likelihood that individuals will maintain their charitable efforts. But a number of the tax law’s provisions encourage philanthropic endeavors.

Though fewer people will itemize with the standard deduction roughly doubling, taxpayers who do itemize will see an increase from 50% to 60% of adjusted gross income that they can deduct each year for cash contributions. If deduction of the full amount is not possible that year, the balance can be carried forward for the next five years. Itemizers may also be pleased to know that Pease limitations have been repealed, no longer reducing the itemized deductions of higher-income earners who give to charity.

Donations of appreciated securities continue to be one of the most tax-advantaged ways to give. Donors can now consider bunching their charitable contributions, adding a larger amount into a donor advised fund (DAF) in one year so they can itemize that gift and use their DAF to support their favorite causes over a number of years.

While many are under the impression that charitable giving will decrease because fewer people will be able to itemize their charitable deductions, the reality is that people often donate not for the tax deduction but for the good of the cause. The true motivator often is the mission of the organization and the spirit that drives the generous to give.

Ups and downs

5%

Estimated percentage of households that are predicted to itemize under the new tax law, down from 30%

60%

Percentage of adjusted gross income those who plan to itemize can now deduct on cash contributions, an increase from 50%

$13 billion

Predicted decrease in charitable giving due to the new tax law, according to Independent Sector

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