Nonprofit leaders have many questions about how the new 2017 Tax Cuts and Jobs Act (TCJA) will affect nonprofit organizations. As 2018 taxes are filed this year, it will provide the first test to see how the new law impacts nonprofits overall and if the changes alter how individual taxpayers make their charitable contributions. There are multiple aspects of the law to consider related to new procedures for donor deductions, the increase in estate tax, and changes in how unrelated business income is managed.
This information about the TCJA highlights some popular considerations about what might occur in the charitable donations area. Whether any nonprofit is affected or not depends on your business operations and how each donor decides to support charitable organizations.
One of the biggest changes is the standard deduction rate, which is significantly increased from 2017 for individual and married taxpayers. That means if you file as a single taxpayer, your standard deduction will rise from $6,350 for 2017 taxes to a standard deduction of $12,000 for 2018 taxes. Married couples filing jointly will get an increase from $12,700 for 2017 to a standard deduction of $24,000. Deductions for charitable contributions can be claimed only if you itemize the deductions, and the new standard deduction is available whether or not you donate to a nonprofit or other charity. Taxpayers who have traditionally itemized their deductions might end up simply claiming the standard deduction for 2018 as this could be higher than what they would be able to itemize. This may lead to the conclusion that the new tax law could lead to a decline in charitable deductions.
However, many people will donate to a nonprofit whether they get a write-off or not, so seeking individual donations is still a viable way to support your nonprofit. There are still ways for donors to make charitable contributions that benefit both the donor and organization as well. One way is to give through a donor-advised fund (DAF) as outlined in this article: https://www.nptrust.org/what-is-a-donor-advised-fund/daf-tax-consideration/
As the TCJA takes full effect, additional topics you might want to review include (1) the changes in the treatment of Unrelated Business Income (UBTI), and (2) increases in estate tax thresholds that could affect bequests to charitable organizations. For more information on these areas and other key changes, see the reference listed below.
Please remember, the information provided here is general and educational in nature. It is not intended to be, nor should it be construed as, legal or tax advice. Spokes does not provide legal or tax advice. You are strongly encouraged to consult with your tax advisor or attorney before making charitable contributions or other tax or legal decisions.
Tax Cuts and Jobs Act: Key Changes: https://www.nolo.com/legal-updates/the-tax-cuts-and-jobs-act-key-changes-for-nonprofits.html
Donor Advised Funds: https://www.nptrust.org/what-is-a-donor-advised-fund/daf-tax-consideration/
Changes to unrelated business income tax (UBIT): http://www.nonprofitlawblog.com/new-tax-law-impact-nonprofits-part-2/
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