“Tax policy can influence philanthropic behavior, but taxes don’t drive the philanthropic impulse” (Tax Reform and Its Impact on Planned Giving, PG Calc, 2018).
The new tax reform law, officially named “Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for the fiscal year 2018,” has many individuals and charities concerned about how charitable giving will be affected.
This analysis contains some of the changes in the new law and best practices for donors to continue making planned gifts:
Individual tax brackets are reduced. There are only slight changes in most of the tax brackets, but the top bracket was reduced from 39.6% to 37%.
Standard deductions are increased for simplified filing. The new deduction levels are $24,000 for married couples, $12,000 for individuals, and $10,000 for state and local tax deductions. This will not eliminate, but will greatly decrease, the number of people who submit itemized lists of deductions.
Charitable gift changes. Deductions for charitable gifts of cash were changed from 50% to 60% of adjusted gross income (AGI), while gifts of appreciated property have stayed at 30%.
Gift tax, estate tax, and generation-skipping taxes are unchanged at 40%. Estates can still benefit from unlimited estate tax deductions for charitable gifts.
Tax-advantaged gifts to consider are securities, real estate, IRA rollover, and larger gifts that rise above the standard deduction.
In light of the new tax reform law, we believe that donors can easily, and should, continue to faithfully support and strengthen charities and non-profits. Generosity is a way to share a legacy and is not entirely based on tax benefits.
Contact your attorney or financial planner to find out how the new tax law will individually affect your charitable giving.
Article credit to PG Calc and Crescendo Interactive
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