Tax Deal: Does it impact fundraising?

Image result for tax plan cartoonIt looks like we’ll have a tax bill signed any day and now we are left trying to figure out what impact, if any, this may have on nonprofit fundraising.

While many final details are still to be revealed, here are the main items that may impact our donors and their giving:

  • “[T]he corporate tax rate would be cut to 21 percent, while the top tax rate for individuals would drop to 37 percent from 39.6 percent. The new rates would take effect next year.”  –  Highest earner get a bit of a break (but might very well get hurt by other things in the bill). For example, if your AGI is $500,000, you just saved approximately $13,000.  You will probably lose more than that if you live in an expensive neighborhood with a really big mortgage (i.e. your real estate taxes are more than $10,000 a year and your mortgage is over $750,000 – see below).
  • “The deduction for state and local taxes would be capped at $10,000 and taxpayers would be able to choose to deduct their property or income taxes, source said.” – Is the $13,000+ break from bullet point # 1 enough to offset the loss from this bill if you pay more than $10,000 in real estate taxes?  The irony of this point is that it really hurts the wealthier sector – something not reported in the media very well.
  • “The standard deduction would be doubled under the deal, to $12,000 for individuals and $24,000 for families.” – This may actually put more money in the pockets of your middle and lower middle earners!  Again, not reported in the media very well. Still, the question is if this disincentivizes charitable giving for those who now will no longer need to itemize?  I suspect not but I am ready to start touting the IRS rollover giving provision in a big way for those 70.5+.  You know what, I will be shocked if this hurts charities at all.
  • “Republicans senators leaving a GOP lunch told NBC News that the agreement would also set deductions for pass-through income at 20 percent.” – I am not sure what this means!
  • “Under the deal, the mortgage interest deduction would be allowed on loans up to $750,000, the sources said.” – Again, hurts our wealthiest sector.  Ironically, nonprofit fundraising could be hurt if this sector is feeling really poor after they finally realize what happened.  Not sure it will impact charity!

The verdict?

Still out.  I am leaning towards people on the higher wealth/earning end looking for more deductions and therefore more charitable giving!  Ok, I am an optimist.  Most likely result for nonprofits: no change.

Look for more posts on this topic as the final details come to light.

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