As the tax reform measures were unveiled, members of the charitable community expressed alarm that the new rules could create a disincentive to donate.
With the larger standard income tax deduction ($12,000 for an individual filer and $24,000 for a married couple), fewer people will realize the benefits of itemizing.
Some charities fear that, absent the tax write-off, fewer people will give. Yet others argue a household’s higher net income will be a boon to nonprofits.
How the tax reform changes will actually impact giving remains to be seen. Here’s a summary of some ways the law might impact annual giving, as well as long-term planned gifts:
Athletic seating:
The law repeals the 80 percent charitable deduction for gifts made in exchange for athletic event seating.
Itemizing threshold:
Some would- be donors may use charitable giving to boost them over the new itemizing threshold.
Unlimited estate tax deduction:
The unlimited estate tax deduction for charitable gifts remains.
New tax on certain college endowments:
The tax law imposes a new 1.4 percent excise tax on the investment income of private colleges with at least 500 students and assets valued at $500,000 or more per student. Endowment funds may be excluded if they are used to carry out a college’s tax-exempt purpose, but the bill does not define which funds are subject to that exclusion. Some donors may reevaluate gifts until the interpretation becomes clear.
New excise tax on highly compensated nonprofit employees:
The tax reform bill now levies a 21 percent excise tax on nonprofit employers for salaries over $1 million.
Donating appreciated assets, charitable giving accounts and gifts directly from retirement assets will be even more important under the new tax law.