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%.
Fundraisers are entering their year-end mode, and for many organizations the majority of their donations come in the last quarter of the calendar year. What is unknown is how the new tax law will change the way people give this season.
Our clients come in all shapes and sizes, so one might expect their planned giving programs to differ. It’s understandable then, that the age ranges of an organization’s audience for planned giving varies by organization and industry. Generally speaking, we suggest targeting donors between the ages of 45-90. But every once in while we hear something that contests that wisdom.
Astute gift officers recognize opportunities for giving, and then seize the day! Such is the moment in some red-hot real estate markets where prices are exceeding the highs reached prior to the Great Recession. Owners who watched as their equity evaporated during the downturn may now be thinking this is the time to cash in on their profits. This may particularly be the case for donors who own infrequently used vacation homes and investors with rental properties who no longer wish to deal with tenant idiosyncrasies. However, sellers of these properties will not receive the generous exemption from capital gains taxes afforded to those who sell a principal residence.
We hope that you’ll pardon the title of this article, which is a modification of the infamous James Carville campaign mantra in 1992 – “it’s the economy, stupid!” As was the case with the original phrase, this expression is meant to be tongue-in-cheek and self-directed. The tax legislation passed by Congress and signed by the President last December seems to have rendered the itemizing of personal deductions much less beneficial for large numbers of Americans. There has been considerable discussion among fundraising professionals that the result will be a dramatic decrease in charitable contributions. Whether or not you agree with that assertion, this article is about something else - the realization that the possible benefits of reducing taxes on realized capital gains by contributing appreciated securities for split-interest gift arrangements remain as powerful as ever.