Giving Thought: Tax law could impact charitable giving
November 19, 2018
Giving to your favorite charities may be more important than ever in 2018, because many nonprofits are bracing for a downturn in revenue.
Due to changes enacted by Congress in the 2017 Tax Cuts and Jobs Act, the tax incentives for Americans to give have been diminished. On a national level, the nonpartisan Tax Policy Center estimates that charitable giving could drop this year by $12 billion to $20 billion.
Signed by the president in December 2017, the legislation nearly doubled the size of the standard deduction — which taxpayers can subtract from their income before computing their tax bill — and scaled back some available itemized deductions. The 2018 standard deduction is $12,000 for single filers, $18,000 for heads of households and $24,000 for married couples that file jointly. So, itemizing your charitable deductions (and others such as moving expenses, unreimbursed travel and mileage costs, etc.) won't make sense unless those deductions exceed the new standard deduction.
"It's estimated that as few as 5 percent of taxpayers nationwide will continue to itemize their deductions," says Renny Fagan, president and CEO of the Colorado Nonprofit Association. "If 95 percent of taxpayers do not itemize, then they will not be able to claim the charitable deduction and benefit from this tax incentive."
This is the first tax year under the new rules, so it's too early to know whether giving will drop or by how much. But Fagan said one analysis of 2018 fundraising returns has shown a 7 percent decline in the number of donors and a 2 percent drop in giving over each of the first two quarters. "These are signs that Colorado's nonprofits could face a significant drop in giving in 2018," he added.
The Colorado Nonprofit Association's 2014 donor survey found that about half of respondents consider the tax benefits when they donate. For high-income households, the percentage climbs to 76 percent. If fewer taxpayers claim the charitable deduction in the future, then their gifting habits will hinge more on their belief in the cause and less on the financial benefits.
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According to Forbes, there are several options and techniques to consider that give donors a tax benefit and continue to support charitable causes. One that Aspen Communtiy Foundation can assist with is establishing or adding to a donor-advised fund. If the gift is large enough, the donor may be able to itemize the deductions that year. In ensuing years, the donor-advised fund can grant to the donor's favorite causes, thereby continuing the donor's support of it. Donors are still able to donate appreciated assets, like stock, and individuals aged 70½ or older can still take advantage of the IRA charitable rollover that was made permanent in 2015.
We encourage you to consult with your accountant or tax adviser about the charitable deductibility of your 2018 donations and what options are best suited for you. And you might want to check in early; 2018 donations can be made through December 2018.
All of us should bear in mind that most Roaring Fork Valley nonprofits rely primarily on those individual donations, and not large institutional or government grants. Whether they focus on the arts, the environment, education or animals, they trust a cadre of loyal locals to keep them afloat and continue their work.
Just as we all have a right and a responsibility to cast our votes in democratic elections, we bear a similar obligation to support the causes we believe in. It may be $10 or $10,000, but we shouldn't assume that someone else will come to the rescue.
Every charitable donation, however large or small, is vital. And that's especially true in 2018.
Tamara Tormohlen is executive director of Aspen Community Foundation.