Tax Reform and Charitable Giving Implications

Today we welcome a special guest on the blog: Stelter’s Senior Technical Consultant, Lynn Gaumer, J.D. In her role, Lynn keeps a close watch over tax legislation, research and trends that could affect your planned giving program.

As of Dec. 22, 2017, the Tax Cuts and Jobs Act has been signed into law by the president.

You and your donors should feel, as we at Stelter do, that the opportunity for planned gifts remains unchanged. Through every study that Stelter and others have commissioned, the primary reason for making a planned gift has been rooted in the love and passion for your mission—tax incentives have always been at the bottom of the list.

However, the new legislation no doubt will create questions for you and your donors. Below are some of the changes to be mindful of as you plan for 2018:

1. New Income Tax Brackets: Under the new law, we will have several new tax brackets: 10, 12, 22, 24, 32, 35 and 37 percent.
2. Nearly Doubles the Standard Deduction. The new law nearly doubles the standard deduction to $12,000 for individual filers and $24,000 for married individuals filing a joint return.
3. Personal Exemptions. Repeals the deduction for personal exemptions.
4. Charitable Contributions for Cash Gifts. Increases the current 50 percent AGI limitation for cash contributions to 60 percent.
5. Estate Tax Exemption. Increases the estate and gift tax exemption to $11.2 million in 2018, which is indexed for inflation.

The number of individuals taking the income tax charitable deduction is expected to decrease dramatically and yet the capital gains tax rate remains intact. Focus your messaging on these positive economic opportunities:

• Gifts of stock: With the stock market at or near all-time highs, the opportunity to give appreciated stocks to nonprofits is more beneficial than ever. Additionally, funding CGAs with appreciated stock is a tax-wise choice.
• Gifts of real estate: Many real estate markets are enjoying gains. Appreciated real estate may be subject to capital gains tax unless donated to charity.

If you wish to focus your messaging on income tax savings, consider these gift types:

• Retirement plan assets: These assets remain taxable when distributed to a beneficiary and tax-free when given to a charity.
• IRA charitable rollover: For those 70½ or older on your list, this gift is beneficial regardless of the taxpayer’s choice to itemize. This can help taxpayers fulfill their required minimum distribution and this distribution will not be considered taxable income.

For wealthier donors, here are some gift considerations related to the law:

• Cash gifts: The new law expands the AGI limitation from 50 percent to 60 percent. These individuals will most likely be itemizing their deductions.
• Charitable remainder trusts: Donors would benefit from funding these with appreciated property to avoid capital gains taxes.
• Grantor charitable lead trusts: Given the higher estate tax exemption rates, this trust may become more popular as these donors (who most likely will itemize) may not need estate tax relief and seek an income tax charitable deduction.

Reminder: Now is an important time to review your collateral print materials, as well as any upcoming print or digital communications to ensure that none of your messaging has become outdated. At Stelter, we are updating our clients’ content to reflect tax changes; you should take this opportunity to do the same.

You may wish to send an email to your donors promoting giving before year-end in order to take advantage of our current tax laws. Once we turn the calendar to 2018, your messaging should highlight the best gift types available for charitable giving based on the new tax law provisions.

Access our sample copy by clicking on the links below.

Sample Donor Letter 2017

Sample Donor Letter 2018

Sample Donor Letter 2017/2018

Ask Your Questions in Our Complimentary Webinar

Stelter will host a complimentary webinar on Wednesday, Jan. 24, to discuss the new tax law. Larry Katzenstein, partner at Thompson Coburn LLP and authority on estate planning and planned giving, will join me to provide an overview of the legislation and discuss how it impacts nonprofits and their donors. You can register for the webinar here. We hope you are able to participate.