As we are all aware, the new tax plan approved by Congress will have some form of impact on charitable giving**. What long-term effect it will have remains to be seen. Since many churches have begun to ask that question, I thought it would be helpful to summarize what we know as we move into 2018.
1. The new plan nearly doubles the standard deduction for individuals ($12,000) and families ($24,000). The standard deduction is the amount taxpayers can subtract from their taxable income without listing, or itemizing deductions on their tax returns. This will simplify filing for many taxpayers and decrease the number of those who itemize. This could slightly alter the giving strategy for some of those deducting charitable contributions.
Some taxpayers won’t need to itemize to raise their deductions above the new standard deductions as in the past. The decision to itemize is typically driven by the amount of annual mortgage interest, charitable donations, property taxes and additional taxes paid.
Of course, these individuals will still consider a contribution as in the past. But the amount could be altered slightly because they do not have that extra incentive since the standard deduction has been raised.
2. If you still itemize your return, nothing changes! If you itemize on your tax returns, you take a deduction for what you give. If you give $10,000, you get $2500 of it back in your taxes if you are (for example) at a 25 percent tax rate. That gift only costs the giver $7,500. That incentive is still there for those who itemize their taxes.
Because of the changes, people can expect to see more appeals and solicitations from every charity and cause. Now more than ever it is imperative that churches communicate the ongoing need, share the impact of the generosity of their people and most importantly not be afraid to ask.
It’s the 100th anniversary of the charitable deduction! It has been a blessing to many churches over the years, allowing individuals to give even more. But it has experienced tweaks and changes along the way. The important takeaway for church leadership is to know, understand and adapt as we move ahead.
It is essential to teach about Lordship. What we have belongs to Him who blessed us with it. We are but stewards. Giving to the church is an act of worship and honoring God. The church is called to spread the Gospel of Jesus Christ and be a generous people.
“The earth is the LORD’s, and everything in it, the world, and all who live in it;” Psalm 24:1
Tax benefits are not the sole reason we give. However, they do help individuals creatively find more capacity to give. That is why the law is there. Let us be about the business of educating our people on ways to honor God in our giving.
Contact us if you are interested in knowing how your church can begin implementing a sustainable holistic stewardship strategy.
**Disclaimer: No decisions regarding giving should be made without consulting your tax professional. Tax laws are constantly changing.