Yesterday, LNWM’s Kristi Mathisen spoke to the Washington Planned Giving Council about the new 2017 tax law, which some fear will hurt donations to charities and non-profits. Although tax deductions for charitable giving are still allowed under the new law, what has changed dramatically is the standard deduction, says Kristi, LNWM’s Managing Director of Tax and Financial Planning.
The standard deduction will double — to $24,000 annually for married filing jointly and to $12,000 for singles — starting with tax year 2018. At that higher level, it is feared that fewer people will have incentive to itemize deductions, leading to fewer charitable donations, since for most Americans itemized deductions are not likely to be higher than the new standard deduction.
Before the new tax law, about 30% of taxpayers itemized deductions. It’s estimated that starting with tax year 2018 only 5% of filers will itemize in any one year. Recent news has been filled with dire predictions of the impact on charitable giving, says Kristi. However, no one actually knows if the impact will be as bad as expected. Historically, 60% of charitable contributions have been reported to the IRS on tax returns. What we don’t know: whether those who no longer report their charitable giving by itemizing will discontinue giving. People may choose to bunch their deductions to itemize in some years and take advantage of the standard deduction in other years. The new law expanded by 20% the amount in charitable giving that you can deduct for tax purposes. In addition, beginning in 2018, those who do itemize deductions won’t have them limited by up to 80% during high-income years. Kristi has been reviewing the new tax law and will be providing her insights in the January 2018 issue of Navigator, LNWM’s quarterly publication.