By Allison Eatough
Charitable giving rose by 1.6 percent between 2017 and 2018, and recent tax code changes could be the reason for the sluggish increase, according to a new report.
The Fundraising Effectiveness Project report1 conducted by the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute, also found donations from general donors (donations under $250) and mid-level donors (donations $250 to $999) fell 4.4 percent and 4 percent, respectively, while donations from major donors of $1,000 or more rose by 2.6 percent.
In comparison, charitable giving rose by 4 percent and donations from general, mid-level and major donations increased by 2.7 percent, 3.8 percent and 4.2 percent, respectively, between 2016 and 2017.
Tax code changes implemented in 2018 may have impacted overall giving, experts say. While the government still values charitable deductions and supports tax incentives tied to giving, the changes impact how some Americans qualify for those deductions.
Under the new code, the standard deduction doubled to $12,000 for individuals and $24,000 for married couples filing jointly. Because of this, the number of households itemizing deductions on 2018 tax forms is expected to drop – especially in middle class families.
For Americans with deductions over $12,000 (or $24,000 if filing jointly), charitable deductions will probably remain the same. However, those who itemized deductions in the past and choose to now take the standard deduction will no longer receive a tax benefit for charitable giving2.
Rosemary Calderalo, director of gift planning for the Baltimore Community Foundation, says it’s too soon to tell how the tax changes will affect donors and their businesses.
“In general, the professional advisors we work with seem to be expressing the opinion that the jury is still out on the impact the tax changes will have long term,” she says.
The foundation, which serves the current and future needs of the Baltimore region, received more donations in 2018 than in 2017 and saw a small increase in the number of younger donors looking to open donor-advised funds in 2018, Calderalo says.
Many donors who gave in 2018 did so before the tax code changes were implemented – all the more reason to seek guidance from a tax advisor, says Brian Kuhn, a financial planner with PSG in Fulton, Md.
“The way the legislation ended up being implemented does potentially affect a taxpayer’s ability to deduct those contributions, depending ironically perhaps on the size of other costs like mortgage interest and state taxes,” he says. “The first step for anyone considering the tax result of a donation would be to see a tax advisor to calculate whether they are likely to itemize or use the new higher standard deduction.”
Even with the tax code changes, Calderalo says she remains hopeful for future charitable giving.
“Ultimately, people just want to do good things in the world, and while it’s not definitive, I think we’re having a glimmer that that will continue to be the case,” she says.
Allison Eatough, Contributor
Allison Eatough is a freelance writer with more than 20 years of experience covering everything from business and finance to higher education and local government. She is a resident of Howard County, MD
This article was contributed to www.psgclarity.com, a division of Planning Solutions Group, a financial planning firm. If you would like to discuss your financial goals with Brian Kuhn, CFP® the financial planner quoted in this article you may schedule a time using the online scheduler at this website, or calling 301-543-6035 or emailing him at BKuhn@psgplanning.com.
No portion of the content in this article may be construed as investment or tax advice.
Securities offered through Triad Advisors, Member FINRA / SIPC. Advisory Services offered through Planning Solutions Group, LLC. Planning Solutions Group, LLC is not affiliated with Triad Advisors. PSG Clarity is a division of Planning Solutions Group, LLC