Leading With Your Mission: Tax Reform and Charitable Giving

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1 Leading With Your Mission: Tax Reform and Charitable Giving Brett Loney, J.D., ACFRE Ann Savage, J.D. Disclaimer This presentation is not meant to offer tax or legal advice. Please consult (and have your charitable donors consult) your tax or legal advisor to know how charitable giving will impact your tax and financial situation. 1

2 What we will cover today The Good The Bad The Details What We Can Do About It Last year s holiday gift.. 2

3 Tax Reform! The good news The reduction in corporate tax could inspire more companies to be charitable. Individual donors can now donate up to 60% of their adjusted gross income annually (up from 50%) Individuals who experience an increase in their wages may give more. 3

4 The questionable news Standard deductions have increased substantially so fewer filers will itemize. $12k for singles, $24k for married couples filing jointly The state and local property/income tax deduction is limited to $10,000 further reducing the incentive and ability to itemize. The personal exemption has been eliminated. A tax credit for minor children has been increased The estate tax was retained but the exemption base was increased substantially (Over $11M for an individual and over $20M for a couple) reducing the charitable tax incentive for estates. The Wild Card: Donor Advised Funds Nearly $1 trillion sitting in foundations and donor advised funds. Bruce DeBoskey, Six ways the world of giving could change in 2018, Planned Giving Design Center Potential Way for Donors to Maximize Deductions. Donor advised funds come with very specific rules. 4

5 Reminder value of thank you letters Donors must continue to substantiate any contribution of $250 or more for which they take a deduction with a written acknowledgement. Nonprofits must continue to send such substantiations to donors. Will tax reform reduce charitable giving? The opinions are mixed, but most agree that the law will most impact households giving between $5,000 and $20,000 annually. If the economy does well and personal income and net worth grows, charitable giving could grow as well. Tax deductions are not the first reason donors give. 5

6 What can we do about it? Remember the Mission and the Impact Make your case Take care of our donors Stewardship Major Giving Planned Giving A compelling mission and giving strategy helps.. Most donors do not give because of the tax incentive most give because they are compelled by the mission and giving is satisfying. Donors who are most excited about your mission will want strategies for giving more, like itemizing every other year or planned giving options. REMEMBER Donors give because we make an impact on an issue that is compelling to them, not because we have needs or a budget deficit Give them a reason to give NOW 6

7 Stewardship is important Keep your best donors close through active stewardship strategies. Let them know how their gift is working. Make then feel a part of the family! The case for major gifts Don t forget the 90/10 or 95/5 rule Donor making bigger gifts can still itemize They have more to give because of the tax cut Individual donors can now donate up to 60% of their adjusted gross income annually (up from 50%) Use the new $12k/24k standard deduction to your advantage 7

8 The value of planned giving Changes in estate tax Value of giving appreciated assets Charitable IRA Rollover Estate planning and retirement plans Donor Advised Funds Charitable IRA Rollover Remember the donor must strictly follow the rules to make a qualified charitable distribution from their IRA. Here is a checklist to follow: Donor must have attained the age of 70½ at the time of the gift. It is not enough to have attained 70½ in the year the rollover is made. The total amount that an individual taxpayer can make in charitable IRA rollover gifts in any year is limited to $100,000. The IRA administrator must make the rollover distribution directly to the charity. If the donor takes a distribution and then makes a gift, that does not qualify. The donor can receive no benefit in exchange for the rollover gift, so only outright gifts to public charities qualify. No life income gifts. The gift also cannot go to a donor advised fund or supporting organization. It can be used to fulfill a pledge, however. The donor is not entitled to an income tax charitable deduction for a charitable IRA rollover. The donor never paid tax on the IRA money and it will not be included as income on the donor s tax return, so there is no offsetting tax deduction. Source Tax Reform and Its Impact on Planned Giving Jeff Lydenberg, Senior Consultant, PG Calc, Feb

9 Make the Case Now is the time to make your case with your donors and prospects What impact does your organization have Don t forget the value of big ideas as the key to big gifts We are in the business of changing the world show them how your organization will do it Remember We are not tax and financial planning experts We can help identify opportunities, but our donors need to consult their own professionals to help understand and guide their own individual situations 9

10 Questions? Contact Us Ann Savage Associate Vice President ProMedica Foundation Brett Loney Associate Vice President The University of Toledo Foundation