Thoughts on the new tax law
January 04 2018 • Rachel Calderon
Lately everyone is talking about the recent changes in the new tax law and how it will affect charitable giving going forward. We’ve been following the updates closely, and have a few thoughts we wanted to share. (Hint: the sky is not falling!)
To start us off, here are some of the biggest changes:
- The standard deduction was raised to $12,000 for individuals or $24,000 for couples, making it less likely for people to itemize. Some people will continue to itemize if the deductions are greater than the new standard deductions.
- Now, people in the lower tax brackets won’t need to make charitable gifts to receive a deduction.
- The estate tax, which provides an incentive for the wealthy to give to charity to reduce their tax burden, was maintained. The exemption was doubled to about $11 million for individuals and $22 million for couples, shielding all but the ultra-wealthy from the levy. However, this is temporary from 2018 to 2025.
- Donors are able to receive a deduction of up to 60% of their adjusted gross income, up from the current limit of 50%.
The common question we’ve been asked is if people will continue to give without the tax benefit. We say absolutely yes. Studies have shown time and again that people usually give from the heart and not solely because of the tax benefit. The benefit is an incentive, but not always the main reason.
Here are a few tips to consider as we head into 2018 under the new tax law:
- Now is the time to connect your philanthropy to strategy and make your charitable dollars go further to make the greatest impact. How much you give is not as important as what you can help make happen. This is an area where we can help.
- If the deduction is important to you and you’ll be giving at a rate above the standard deduction, the key would be to ramp up your charitable giving now, or do more every other year. Either of these strategies fit well with a donor advised fund, enabling you to receive the tax deduction now and make giving decisions later.
- If you have had an estate plan put together by a professional advisor in the past, now is the time to have it reviewed to make sure it still serves you well under the new tax law. If you need a referral to a qualified professional advisor, we can help.
- No matter what, we all care about the community and want to make it better. The bottom line is people don’t give solely for the tax deduction - they give because they care.
- During this first year under the new tax law, we will “try it on” and see how it goes. Remember, professional advisors across the country are developing new strategies to help their clients, and we have new giving strategies to help you and your family make your giving matter.
With these thoughts in mind, we encourage you to take the first step toward making change happen in your community. Let’s connect and get the conversation started.