The New Tax Law and Your Ministry

Fact Sheet for Ministry Leaders

As the new tax law was being debated and passed, there was much speculation about how it would affect charitable giving.  Now that the law is in effect, we know several provisions will impact taxes for ministry supporters. Here are some of the key changes and how they might impact your ministry.

Now that the Tax Cuts and Jobs Act has passed, we know several provisions will affect charitable giving. Here are some of the key changes… 

1. Increase in the standard deduction for all tax filers.

The standard deduction has been raised to $12,000 for individuals and $24,000 for married couples. Since they’ll receive the benefit automatically, this eliminates the need for many people to worry about charitable receipts as they file their taxes. Some have suggested that by reducing the tax incentive, the new law will cause people to give less to charity. 

We believe, however, that most of those who support kingdom causes will continue to give, since tax incentives were never their primary motivator anyway. Generosity is most often driven by the desire to further a worthy cause and in response to a request that speaks to their values, rather than the tax savings of the gift.  Givers usually focus less on the tax savings than on the desired result of their gifts.

2. Increase in charitable deduction limitation.

In the past, donors were limited to deducting up to 50 percent of their adjusted gross income in any one year. The new tax bill increases that amount to 60 percent.

This change will likely increase charitable giving among a select few of your most generous givers.  There are people who want to give as much as they can to maximize the tax benefits, but their tax professionals have informed them that they need to limit their giving to the annual 50 percent cap.  The increase will enable these individuals to give more each year, and we can expect they will do so. 

3. Increase in estate tax exclusions.

The estate tax exclusion amount has been increased to $11,200,000 for individuals and $22,400,000 for married couples, a level at which 99 percent of Americans will have no federal estate tax to pay. 

The threat of estate tax has been a primary motivator used by estate planners, financial planners and planned giving professionals alike.  For all practical purposes, this will no longer be an issue for the vast majority of your donors.  Estate gifts that are motivated by estate tax avoidance conversations will be non-existent.  Therefore, donors and their heirs will have more non-taxed resources with which to give. Ministries will need to emphasize values and mission-based motivators for people to make estate gifts to their favorite ministries.

Opportunities for your Donors

1. IRA gifts are tax-smart gifts, for donors over 70 ½, since this reduces their taxable income, whether they itemize their deductions. 

2. Gifts of inventory or commodities also make excellent gifts, since these also reduce taxable income. 

3. Appreciated asset gifts remain excellent opportunities since they help your supporters avoid capital gain income (as well as providing a charitable deduction for those who itemize).

4. Life income gifts like charitable gift annuities and charitable remainder trusts will continue to be attractive gifts for donors who need lifetime income.

5. Donors whose taxes are now reduced have more disposable income.  This provides them with additional cash flow for charitable giving and other discretionary spending.  

Remember that the greatest motivator of all giving still remains unaltered.  Those who ask, receive.  Make sure you are asking people to support your ministry regularly and systematically.  Most people give less than they could because they are either not asked or not shown how their gift would make an impact that is aligned with their values.