With the December 2017 passing of tax reform legislation, Catholic fundraisers are undoubtedly looking at a new environment for giving in 2018. But the foremost question is: how and to what extent will tax reform affect giving to our missions?
Experts seem to have mixed expectations, ranging from viewing this as one of the most major developments to affect charitable giving in the past 100 years, to it just being another change in paperwork that won’t dramatically impact the deeper desire of donors to support missions that matter to them.
Regardless, there are few truths that we can build upon for our 2018 fundraising plans and predictions.
Fewer donors will be itemizing.
For a large percentage of middle class taxpayers, the standard deduction will be higher than the deductions they would receive if they itemized, which effectively removes the incentive to itemize deductions as they have in the past, including their charitable giving. Since taxpayers at the top end will still be itemizing, their tax deduction motivated giving will not be affected. The debate is if removing the itemized tax deduction reduces the incentive for middle class donors to give.
While many predict that will lead to a dramatic decrease in charitable giving, others say the tax deduction is not the true giving motivation for middle class donors.
And there is some other good news:
“Many of those who will no longer itemize deductions due to the expanded standard deduction and other factors will, however, find their overall income tax bill reduced under the new tax law,” according to Robert F. Sharpe, Jr. and Barlow Mann, of the Sharpe Group. “As a consequence, they will enjoy increased discretionary income that can be spent, saved or donated to charity.”
Pay special attention to major and mid-level donors.
While more taxpayers may be electing not to itemize, for those that DO, their limit of deduction has increased from 50% to 60% of adjusted gross income. This may only be a small percentage of the population, but for those whom it applies to, it is an incentive to give even more.
Mid-level donors are where you could potentially see a drop in giving. According to the Indiana University Lilly Family School of Philanthropy, for the approximately 30 million households making between $50,000 and $100,000, charitable giving will effectively be taxed since their first $24,000 is shielded from taxes under the standard deduction.
“Suffice it to say many of your mid-level donors may not exactly be feeling the love,” said Claire Axelrad. “This is where your opening lies. Now, more than ever, you have an opportunity to show them some love. So double down; treat your donors like royalty. All of them, not just the big donors.”
Donor relationships are important as ever; maybe even more.
While the new tax code eliminates the tax deduction as a possible motive for charitable giving for a large percentage of donors, it does not change those who give for other reasons, like wanting to support your mission.
Your fundraising office can focus less on educating donors on tax benefits and more on educating donors on how their support will continue to help your mission.
“It really is all about the donor. Keep telling stories of the impact and outcomes the donor makes possible by their giving,” said Jack Doyle of Amergent.
Priorities for Our Fundraising Missions
The biggest priority facing Catholic fundraisers now is informing donors about the remaining tax incentives, and more importantly, your continued need for support.
“Despite the unknown challenges that may face us in the coming year following tax reform, we know that support comes to, and keeps coming to, organizations that create a donor-centered, mission-focused culture of philanthropy,” said Sr. Georgette Lehmuth, OSF, President/CEO of NCDC.
A great example of one of our nonprofit members, the Catholic Foundation of Greater Philadelphia, informing supporters how tax laws will affect their giving: Is the new tax law changing the way you think about charitable donations? Here are a few ways you can still realize the greatest tax benefit for your gifts!
More resources on tax reform:
- 2018. Time to Stop Giving Donors Tax Advice [The Artful Fundraiser]
- New Tax Law Further Underscores the Importance of Donor Relationship Building [Bloomerang]
- Charitable Deductions– Revisiting the Basics [Sharpe Group]
Want to learn more about the new environment for giving in 2018? Join us for one of our upcoming webinars.