Proposed Changes to Tax Law and Charitable Giving
As the year comes to a close, it is widely believed that we may see significant changes to the tax code in the coming year. If charitable giving is part of your legacy strategy, these changes may affect you. For many, it may make sense to make charitable gifts this calendar year, before proposed changes that could reduce the benefits from your philanthropy take effect.
A recent Wall Street Journal article, written by Laura Saunders, analyzed three different proposals that are likely to be considered next year. Present-elect Donald J. Trump has proposed to reduce the top income tax rate from 39.6 to 33 percent and to cap total itemized deductions at $100,000 for individuals and $200,00 for married couples filing jointly.
As stated in the Journal’s report:
All three plans would make it harder for individuals to benefit from specific tax deductions, for several reasons. One is that each plan raises the amount of the “standard” deduction, which gives taxpayers less need to break out deductions for mortgage interest, charitable gifts, state taxes and the like on Schedule A.
In addition, the value of a deduction drops as a taxpayer’s rate goes down. Thus higher earners may want to make charitable gifts this year to reap a greater benefit.
Although tax benefits alone are seldom the primary driver for the charitably inclined, understanding the impact of these potential changes will help you make better choices with respect to charitable giving.