Tax changes are coming. Barring a last minute miracle the “Tax Cuts and Jobs Act” is likely to be signed into law by the end of the week. Many analyses are making the rounds and as the final bill gets closer to the president’s desk there will be much more talk about the implications it will have in the coming years. There will be opportunities to protest and challenge the draconian cuts to healthcare — and to lobby for the most vulnerable who will be the most impacted by various aspects of the bill.
Several links are at the end of this article that help explain many of the changes … and we will have further conversations in the days and weeks ahead. One change, however, will have a deep impact on All Saints Church, as well as churches and other non-profits across the country. That is the change we focus on today.
The final bill nearly doubles the standard deduction, from $6,350 to $12,000 for single filers, and from $12,700 to $24,000 for married couples filing jointly. The higher standard deduction means that substantially fewer taxpayers will itemize their deductions, including charitable contributions, on their tax returns, reducing the incentive to give to charities.
Experts across the non-profit sector agree that this will have a detrimental effect on non-profit organizations’ ability to serve their communities. Despite altruism being a hallmark of our culture, with the number filers who itemize their deductions estimated to fall from more than 30% to less than 5%, charitable giving is projected to decline by nearly $13 billion annually, as millions of taxpayers will see no tax benefit for their generous contributions in 2018. Beyond the financial impact that will have on organizations, it is estimated that 220,000 to 264,000 non-profit sector jobs may be at risk, drastically reducing the mission capacity those organizations bring their communities. All Saints Church is not immune from this, and pledgers at every level will be impacted.
This is Christmas season, though, and while the financial challenges we will face in the coming years are real, the good news is that there are still two weeks to maximize the impact of your generosity at All Saints while also using 2017 tax advantages before they end. Here are some things you can consider before the end 2017.
If you have been itemizing your taxes and are uncertain whether it makes sense to deduct contributions next year, you might consider accelerating your contributions before the end of the year to get a larger income tax deduction this year. If you are able, you might consider pre-paying all or part of your 2018 pledge by December 31, or give a larger Christmas or year-end gift. Whether your tax rate will increase or decrease next year, the tax advantage of your contributions will be vastly reduced, so your deductions are more valuable if itemized and claimed against this year’s income.
If you are in a position to do so, you might consider paying for several years of pledges now if you can afford it. For such large gifts, taxpayers currently receive a deduction for contributions of up to 50% of their adjusted gross income, increasing to 60% next year. In addition, if your contributions exceed 50% of your AGI, you can carry over the excess for up to 5 years until the amount is fully used.
Another option is to start a donor-advised fund at a local foundation, such as Pasadena Community Foundation, Fidelity Charitable or Schwab Charitable, among many others. This allows you to give a large contribution to your donor-advised fund now, taking advantage of current tax deductions, while waiting until a later time to decide which organization to support. With these tax changes, they are all working around the clock, so act fast if you want to explore this option.
Donating highly appreciated stock (or underperforming stock) might also help you. All Saints has information here that you can provide your stock broker if you would like to donate stock. We also have a number of other giving methods listed here, including donating from your IRA, donating vehicles, and employer matching.
The bottom line is that if you are concerned about how your generosity to All Saints might be affected because of the tax bill and you are in a position to increase your giving before the end of the year, you might want to take action now.
And finally, as always, please consult with your tax and financial advisors regarding your tax situation. The Giving Office is also a resource for you. Please reach out to Jim Loduha, Senior Director of Development and Giving, at JLoduha@allsaints-pas.org or 626.583.2736.
Resources to help explain the tax bill:
- The Conference Committee bill in its entirety
- NPR’s chart about how the bill might affect you
- Tax Foundation summary
- National Council of Nonprofits comparison of all versions