The Tax Cuts and Jobs Act of 2017 (the Tax Act) doubled the standard deduction and capped deductions on state and local taxes at $10,000, while retaining the income tax charitable deduction. The doubling of the standard deduction and capping state and local taxes means far fewer taxpayers will itemize their deductions on Schedule A of Form 1040. Fewer itemizers will mean fewer people benefiting from the itemization of their charitable deductions. The Council on Foundations is predicting a drop of $16B - $24B in charitable giving off a base of $390B. That’s about a 5% drop. A study by the Lilly Family School of Philanthropy projects a potential decline in charitable giving of 1.7% to 4.6%.
The National Association of Charitable Gift Planners (CGP) created a task force charged with defining metrics to evaluate the work of gift planning fundraisers and to develop guidelines for criteria to measure the performance of planned giving programs. The task force has not issued its final report, but we have some feedback on their likely recommendations. Best practice performance metrics will provide a basis for evaluating the success of a charity’s planned giving efforts.
The Republican leadership on Wednesday September 27, 2017 released a framework for proposed tax reforms for consideration by Congress. While the framework proposes retaining the income tax charitable deduction, it also proposes nearly doubling the standard deduction. Reducing the number of itemizers arguably reduces charitable contributions without the incentive of itemized charitable gifts. Nonetheless, giving is motivated by more than just tax incentives. It remains to be seen how decreasing the number of itemizers might affect charitable giving.
The Trump administration has announced a tax plan for Congressional consideration. The plan features reduction of personal and corporate income tax rates including taxes on pass-through business entities such as S corporations, compression of the number of tax brackets from seven to three and an increase in the standard deduction. Personal income tax rates are reduced to 10%, 25%, and 35% brackets. This proposal eliminates the deduction for state and local income taxes but the income tax charitable deduction remains.
It may seem like it will never end, but the Presidential campaign will soon be over. (Let us please not have a recount like Florida in 2000!) Polls are suggesting a presumptive winner. Nonetheless, the number of undecided voters are at record levels, which introduces unprecedented uncertainty into the election. With that caution in mind, let us compare what we know about the economic priorities of the two candidates with particular emphasis on how their plans would influence charitable giving.