Giving in the Time of Tax Reform

May 31, 2018

The greater La Crosse area has consistently proven to be a caring and compassionate community that is willing to share and give time, talent and treasure to make this a stronger and more vibrant community for each of its citizens.

This community values and supports the extraordinary works of our nonprofits and knows how important they are in meeting the unmet needs and wants in our community.

Giving is personal and comes from connections. We give to benefit or support causes and charities that are near and dear to our hearts and souls. Giving allows us to remember and honor the goodness of others or loved ones and is a way to pay it forward. It is gratitude for our blessings. By giving, we are part of something bigger and are forging a brighter future.

Many are wondering what if any impact the new tax laws will have on charitable giving.

Earlier this year, philanthropic and charitable organizations sounded the alarm, estimating that the new tax rules would result in $12 billion to $14 billion less in charitable giving. Experts are advising we brace for a downturn in charitable giving and are reporting significant less first-quarter giving than in years past.

I believe that it might be too soon to tell, and this lag in giving may be that some donors are waiting for clarification and how to best navigate these new giving waters.

The Tax Cut & Jobs Act nearly doubles the standard deduction ($6,350 to $12,000 for single taxpayers and $12,700 to $24,000 for couples filing jointly).

This is significant for a few reasons. First, it may provide donors with more disposable income for charitable giving. However, the same taxpayers may not get any additional tax benefit for donations depending upon the size of their contributions. Experts are predicting that this will take away the incentive for those who are making smaller gifts and not itemizing.

For those who plan to itemize, the limit on cash gifts has increased from 50 to 60 percent of adjusted gross income. This increase can provide a more accelerated tax savings on larger donations. It is recommended that these types of donors work with their financial adviser to devise a charitable giving strategy that includes the timing of these larger gifts.

A strategy to consider is “bunching” or “stacking,” for those who may not have combined deductions more than the standard deduction and has been dubbed the charitable strategy of the future. Instead of giving an annual gift, those yearly gifts are “bunched” into one year and given in one lump or bunch. This can be done when one “stacks” the Schedule A of deductions to maximize the tax benefit during a year when it optimal to itemize.
Another strategy that allows for continual charitable support is the donor advised fund. It is a tax-exempt vehicle that provides for future gift/granting.

DAFs are funded through gifts of cash or appreciated stock or securities. The money is later directed through grants to charities of one’s choice. A donor- advised fund can be established at local community foundations or through financial institutions. Of course, my bias leans to DAFs through a community foundation where the monies remain in and benefit the community and where experts can assist in establishing an impactful charitable legacy.

For those donors who are 70.5+ years young and need to take the required minimum distribution from their IRA, that distribution can to go directly to a qualified charity of an individual’s choice. This counts toward the minimum contributions and the distribution is not taxable, though it is not allowed as a charitable deduction.

To take advantage of the more advanced charitable planning techniques such as a charitable reminder trust or a charitable lead trust, consult with our financial professional. The community foundation can also provide you with information and expert advice on these options.

St. Francis of Assisi said, “For it is in the giving we receive.”

I believe that as much receiving a tax benefit is a bonus, it is not a driver of our community’s culture of care and generosity. It is important that we are aware of our options and of all that we receive by giving and continue this incredible tradition of supporting one another and our local charities.

This article was contributed to the La Crosse Tribune and published Sunday, May 27, 2018 in the Opinions.