Now that the deadline for submitting 2017 tax returns has passed, attention can turn to 2018 income tax planning. Vital to proper planning is understanding the changes enacted by the Tax Cuts and Jobs Act of 2017 that officially became law on December 22, 2017 and the implications of these changes on charitable giving.
In the wake of the most sweeping tax code changes in more than 30 years, there have been many questions and much confusion about how the new tax law might impact charitable giving. As evidenced by the news headlines in the weeks leading up to the new tax code being passed into law, many feared philanthropic giving would be adversely affected by the proposed changes. Reliable industry experts predicted the new tax law might cause charitable giving to fall by billions of dollars. Non-profits and donors alike worried about how the new tax reform proposal might negatively impact initiatives that rely on philanthropy and charitably-minded supporters who desire tax relief. The impatient among us, unwilling to wait until the final bill was ratified, gave advanced gifts prior to December 31 to ensure their charitable giving would remain tax deductible.
As the new tax code finally passed and officially became law just prior to the end of 2017, a close examination of the changes enacted suggested that the potential negative impact on philanthropy was largely unfounded. Although failing to deliver on its original goal of simplification (the final bill comprises 500+ pages) and facilitating a postcard-sized tax return, the code did bring sweeping changes that provided tax cuts for most businesses and individuals. It also resulted in a number of deductions, credits, and adjustments that were repealed or curtailed. But in the end, the charitable deduction came through the process unscathed and was even enhanced for donors making larger gifts. In addition, the new tax code actually expanded the ability of donors to give more by increasing the Adjusted Gross Income (AGI) limitations from 50 percent to 60 percent of AGI.
The fact that the new tax code actually expanded charitable giving benefits for generous donors is something that has been overlooked by many. As a result, the environment is still favorable for charitable giving, and the tax benefits for doing so are still largely intact.