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The team from Charity Navigator, the nation's largest independent charity evaluator and leading donor advocate, shares their thoughts on emerging nonprofit-sector issues and offers tips to better inform your intelligent giving decisions.

Monday, February 12, 2018

Donating Under the New Tax Law


There has been much discussion about the effect the new tax law may have on the charities you support. With the standard deduction doubling, some estimates suggest that charitable giving in the United States could drop by $20 billion. This would significantly weaken the power of organizations to provide important services to individuals in your community and state, our country, and people around the globe.

Today we’re sharing a few ideas for continuing to support your favorite organizations under the new law.


Have a Plan

Charity Navigator has always advocated that intelligent giving starts with a plan. Your plan may include a budget of how much you’ll have to donate this year, as well as a list of the organizations you intend to support. You may even create a schedule of when you’re going to make your gifts over the course of a year.

Always start by doing your research. Charity Navigator offers more than 9,000 charity evaluations and 2,400 impact reports to help you determine which charities you’re going to support. Know what matters to you and how you’d like to use your resources to change the world--then find the organizations that are going to help you do that.

Remember that despite the change in the tax code organizations need support to continue to deliver their services. Having a plan allows you to account for charitable giving in your budget, and ensures the charities you love will continue to have the funds they need to operate.

Speak with Your Accountant or Financial Adviser

Depending on your financial situation you may find an alternative giving method gives you the freedom to be more generous. 

Some individuals and families may find they are now able to be more generous by setting up a Donor Advised Fund (DAF) and making donations through that account. DAFs enable you to put aside and claim tax-exemption over a sum of funds that can be doled out over time. 

Your accountant or financial adviser may also recommend a schedule for giving, like being more generous bi-annually versus annually to exceed the new standard deduction. It is always best to seek the advice of a professional to ensure you are doing the most with your money.

Be a Partner

We like to think about donations like investments. You give to partner with the organizations you support in the work they’re doing to change the world. Continue to partner with them financially. And talk to them to learn about how things are changing--where do they see new and emerging needs? How are their programs changing to reflect that? Are there other ways (volunteering, being an “advocate” to your networks, etc.) that you can help them?

These are just a few ideas to begin thinking about how you will continue to support the charities you care about under the new tax law. Do you have plans for what your support will look like in 2018? If so, what ways are you finding work well to ensure you can continue to be generous?

3 comments:

Sherry said...

Is the problem that people who itemized before might not be able to itemize now? The cause is not only the change in the standard exemption but the changes to what can be itemized isn't it? No one I know seems to know exactly what the deal is with charities and taxes. I think that richer people will still be able to use the charitable donations because they probably have a greater chance of being able to itemize now.
But is there a limit to how much of your charitable donations can be used for itemizing if you CAN itemize???

MoP said...

A person who has a traditional (as opposed to a Roth) IRA and is over age 70 1/2 has a very attractive and tax-efficient alternative for making charitable contributions. He or she is required by the IRS to take a minimum distribution each year from the IRA. But the IRS permits any amount of the required distribution (up to $100,000 per year) to be distributed directly by the IRA custodian to one or more qualified charities designated by the IRA owner, with a corresponding reduction in the taxpayer's adjusted gross income. These are known as qualified charitable distributions, or charitable rollovers. Consequently, charitable rollovers offer the same tax benefit as itemized charitable deductions, but without the need to itemize. Certain other benefits may accrue from the reduction in the taxpayer's AGI, such as staying below a threshold that triggers an increase in Medicare premium. Charitable rollovers are not permitted for any other types of retirement plans, such as 403(b)'s and 401(k)'s.

Ian Turner said...

I am not a tax professional, but according to my understanding, the main effect of the new tax law on charitable giving comes from the increased standard deduction and elimination of the state and local tax deduction. As a result of these two changes, the amount donors would have to give before it would be beneficial to itemize is much higher.

There are limits on the charitable deduction, but as far as I'm aware they are unchanged. The most common limit is 50% of income, but there are other limits for certain types of gifts. More information can be found in IRS Publication 526.