Will the New Tax Law Reduce Charitable Giving?

The new tax bill that was recently signed into law doubles the standard deduction for couples filing jointly, to $24,000.  So, the big question in the minds of non-profits is, “Will this new tax law cause donors to cut back on their charitable giving?”

I like to think that donors give first from the heart, and then if there’s a tax benefit, it’s just icing on the cake. Generally, people give when they see a need in an area that they’re passionate about, and because they can… and the last thing on their list is the personal tax benefit.  But, tax incentives can certainly encourage people to give more or sooner in certain situations. 

The Morton Community Foundation is your one-stop-shop for philanthropy.  We are a grant-making organization with over 50 different funds to which you can donate, including the Morton Impact Fund, our unrestricted fund from which most of our competitive grants comes.  You can write one check, or make one online transaction that is split between any number of different funds.  You can find our complete list of funds on our website at www.cfmorton.org.  We are a 501(c)(3) charitable organization, so all donations are tax-deductible to the fullest extent allowed by law.

Here are some things you might consider, that offer significant tax benefits.  You should, of course, check with your tax professional to determine if any of these types of donations would be beneficial to your particular situation.

Donor Advised Funds – You make a lump sum donation of cash, stocks, etc. now, take the charitable deduction now, and then you make grant recommendations to qualified charities over the coming year(s), $250 per grant minimum.  The Morton Community Foundation then confirms the charity is a valid 501(c)(3), and mails checks, along with a cover letter explaining that the grant was recommended by you, from your fund.  For details on our endowed and non-endowed Donor Advised Fund options, call our office at 309-291-0434.

Direct Transfer of Highly Appreciated Stocks – You may have your broker wire a direct transfer to the MCF, of stocks that have greatly appreciated, which if you were to sell, would trigger a capital gains tax.  Because you direct transfer them to the MCF, you will pay no capital gains tax, and we can liquidate the stock without incurring any tax as well.  With the current favorable price of CAT stock, this is a great way to make charitable donations that don’t come out of your current cash flow and reduce your tax liability at the same time. You may use this direct transfer to make a donation to an existing fund, or to start your own endowed fund, or to fund your new or existing Donor Advised Fund.  You can have your broker or financial advisor contact our office for information on direct-transfer of stocks.

Direct Transfer of IRA Required Minimum Distributions (RMD) - If you are age 70-1/2 or older and haven’t yet met your Required Minimum Distribution from your IRA, the IRA Charitable Rollover is now permanent, therefore you can donate to any 501(c)(3) charity from your IRA as part of your RMD and those monies won’t be taxed as income.  To do this, please call your IRA administrator as the distribution has to come directly from the IRA, not to you first and then to the charity – it’ll be taxed that way.  The max on this is $100,000 per qualified account, therefore couples can donate up to $200,000 from their individual IRAs and not have that donation be taxed as income.  Donations from IRAs can be used to set up (or contribute to existing) designated, field-of-interest, or scholarship funds here at the Community Foundation.  Please note that you cannot use your IRA Charitable Rollover to set up or fund an existing Donor Advised Fund.