2017: A Very Important Tax Year

As the House and Senate work on reconciling the details of their two tax plans, there is one thing we know for sure: Change is coming in 2018. As you contemplate the end of 2017 and how you communicate with your donors, you need to keep this in mind.

We typically advocate that our clients do a year-end reminder to their donors that contributions are always welcome — even at 11:59 PM on December 31. Because many people put off their giving until December, reminding them to think of you as they give is a good idea. This year, however, it may be especially important to remind donors that the proposed changes may impact the deduction of charitable contributions moving forward.

As currently passed, both the House and Senate bills increase the standard deduction to $12,000 for single filers and $24,000 for married filers. Additionally, both bills cap or eliminate the amount that can be deducted for mortgage interest and local taxes. This means that a lot less people will be itemizing their deductions.

Now stay with me here, this is important.

What this means for your donors is, unless they have more than $12,000 or $24,000 in deductions, there will be no need to itemize their taxes and, therefore, they won’t be deducting their charitable contributions.

This makes year-end 2017 important as donors contemplate their year-end giving. For donors who anticipate that they will not be itemizing in 2018 and beyond, the end of 2017 could present an opportunity to accelerate some pledges or giving intentions, in order to itemize and deduct contributions on their 2017 tax return while they still can…and take a larger deduction. This is also potentially beneficial as both plans propose to lower the tax rate for many in 2018. Therefore, getting more deductions now while in a higher tax bracket, means those contributions will have more impact in lowering a donor’s tax bill.

Of course, people don’t give for the tax deduction – it is an incentive for giving, but not the primary motivation. People give because they value what you do. But, you can help your donors to think through their year-end giving strategies by informing them of these issues, and at the same time keep yourself on top of donor’s minds as they make these decisions.