What You Should Know About the New Tax Law and Charitable Giving

Much has been said about the Tax Reform Law and its potential impact on charitable giving. Now that it has been signed into law parishes, schools and cemetery boards may find the following information and guidance helpful. The most important thing to remember is that the sky is not falling as it relates to donations, especially to religious organizations and this new law.

 

What Has Changed/Not Changed Related to Charitable Giving

    • The charitable deduction for those who itemize is still available and has not changed. In fact it has been enhanced allowing individuals to deduct up to 60% (up from 50%) of their adjusted gross income to charity.

 

  • The standard deduction (the deduction allowed for individuals on their tax form) has been nearly doubled to $12,000 for individuals and $24,000 for married couples. This change, coupled with restrictions on the maximum allowed for deductions for mortgage interest, property taxes and other state/local taxes will reduce the number of individuals who itemize. In other words, fewer taxpayers will itemize.

 

  • Those who no longer itemize will receive no tax benefit for cash gifts given to charity.  
  • The tax cut means more individuals have, at least until these cuts are phased out over the next ten years, more discretionary income.
  • Gifts that receive a tax credit (such as the STO), appreciated stock gifts, gifts of property, grain gifts, and IRA gifts are STILL very lucrative gifts for individuals to consider. Nothing has changed in any of these areas.
  • As of now, none of these changes have been incorporated into Iowa law.

 

Best Practices as a Result

 

  • Mission, Mission, Mission. Study after study as to why men and women give (especially women) clearly indicates that tax deductions are not high on the list. People give to a cause, to the mission of the organization. For parishes and Catholic Schools that actively promote gifts, this is golden. The message of Christ was, is and will be forever the expectation that we help those in need by, among other things, being good stewards of the many gifts to which we have been entrusted. We shouldn’t be subtle about keeping this concept in the forefront of our parishioners.
  • Thank you notes, letters and conversations are even more important. A personal handwritten note is still the best way to show appreciation for gifts, volunteer efforts, etc.
  • We are still required to properly acknowledge all gifts with the required IRS disclaimers. Not that any parish does this, but do not emphasize tax aspects of regular cash donations.
  • It’s a cliché, but being financially transparent is even more important. It would be good practice to review how periodic financial information is presented in the bulletin.  An explicit end of the year financial report will be important to enhance trust with parishioners. In both instances the easier it is to understand the better.
  • Finally, time will tell how the new tax law will impact parishes. But in the short term there is an opportunity to:
  • recommit to what we do and why we do it,
  • encourage donors to be generous to support our mission,
  • help the poor and the marginalized, and
  • be good stewards.