There are a lot of studies, some positive and most negative, about the impact on giving based on the Tax and Jobs Act of 2017 passed and signed into law in December 2017. Although we don’t know what the impact will be as of yet, there are things we do know. Below is a summary of what you should know as a charitable gift officer.
- Charitable giving remains intact.
- The Standard Deduction doubled. Claimed by about 70% of taxpayers:
- For Individuals: was $6,500, now $12,000
- Married filing Jointly: was $13,000 now $24,000
- If age 65+:
- Individuals can add $1,600 to Standard Deduction
- Married, filing jointly, can add $1,300 per spouse
- Seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, 37%
- The Alternative Minimum Tax still exists but exemptions have been raised (single $70,300 and joint filers $109,400)
- Donations of appreciated securities still qualify for full fair market value deduction, with itemization.
- Charitable deduction amount for cash gifts was capped at 50% of AGI. It is now capped at 60%.
- IRA Rollover for charitable distributions remains intact!
- For age 70 ½: can charitably give up to $100,000 per IRA per calendar year to charities. May satisfy the Required Minimum Distribution (RMD). Also is not added to Adjusted Gross Income helping to lower taxes on Social Security or Medicare premiums.
- Impact on Estate Planning
- Federal Estate Tax was not repealed but won’t apply to 95% of Americans.
- Exemption is doubled:
- Individuals: $11.2 million
- Couples: $22.4 million
- Step-up in inherited capital assets remains the same.
- Appreciated stock, mutual funds, real estate valued at date of death making all gains tax free.
It is important to remind prospects and donors to review Wills, trusts, beneficiary designations, and other documents.
+ More to come from the IRS as “things get clarified over time.”
Note: For individuals, this Tax Law will end in ten years or 2027, unless Congress acts. If no action, then the law will revert to 2017 rules.
Sources: “New Tax Law: 8 Smart Tax Strategies for Retirees,” Kiplinger.com ;Tremblay & Associates; Partnership for Philanthropic Planning, RI