Newsletter from
Steve Richardson & Company, Certified Public Accountants
December 28, 2017
Tax Planning for Charitable Contributions!
Generous People!
Most people are, by nature, generous in their charitable giving; they will certainly take full advantage of any tax deductions available. But!
But a Tax Deduction will not motivate people to give!
Very few (if any) people make donations to get a tax deduction. Tax deductions do not motivate people to give.
Tax Law Defines a Charitable Organization
Most Charitable Organizations are non-profit entities that qualify under §501(c)(3) of the Internal Revenue Code. These organizations include churches, synagogues, mosques and a variety of other religious organizations. They also include a wide variety of non-religious organizations such as:
- educational,
- scientific,
- literary,
- testing for public safety,
- fostering national or international amateur sports competition,
- preventing cruelty to children or animals
- And other charitable organizations
And other charitable organizations
And other charitable organizations: if that sounds like a “catch-all” it is. Charitable organizations that qualify for §501(c)(3) status are so diverse and complex, that they cannot be listed in the law but must be defined by function.
For Example:
I spend a great deal of time and money investing in the West Alabama Food Bank. The mission of this entity is to feed people who are hungry in nine West Alabama Counties. Where a man puts his time and his money – there goes his heart. This mission is important to me. This organization is clearly one of those “other charitable organizations.”
Why did Congress create §501(c)(3) of the Code?
Congress was motivated to create §501(c)(3) of the Code to “Lessen the Burdens of Government”. Governments, at every level, have legal and ethical obligations to see to the health, education and welfare of the people. This obligation is too big and too diverse for the government to meet without significant assistance from the private sector. Charitable organizations are necessary to help governments see to the needs of the people.
It is for this reason that tax deductions are granted for charitable contributions.
Charitable Organizations are concerned about the New Tax Law!
It is true, many churches and other charitable organization are concerned; personally, I think that many of these concerns are unfounded.
I do not believe that the nation’s churches and other charitable organizations will see any significant decline in donations.
To Charitable Individuals and Corporations
As a CPA, I would advise two things:
- Continue to give. In fact, reevaluate your giving and take a hard look at your motivations to contribute money to the charitable organizations that you support. If you honestly reassess the reasons that you give, it may be that your level of giving may actually increase.
- If you are entitled to a tax deduction for donations, take it, but do not let the deduction confuse why you are making the donation.
- Even with less tax motivation, there are still tax planning opportunities!
Tax Planning for Charitable Giving
Many of our clients are generous givers. Some of our clients give right around that $20,000 a year mark (some much more, even up to a $1,000,000 or more a year). Consider this: double up your giving in one year and skipping the following year. In this way you can have $40,000 in charitable tax deductions in one year followed by zero dollars the following year.
Caution: if you do choose to “stagger” your charitable giving, please talk to the charitable organizations that you support so that they are fully aware of your tax planning. Staggered giving represents budgeting problems for most churches and charitable organizations; they need to know your intent so that they can put into place certain budgetary controls.
To Charitable Organizations:
How do you deal with the new tax law?
Because of the new tax law, many organizations believe that charitable contributions will drop. I believe these concerns are unfounded. I think I am right; I hope I’m right! But, this is a new fund raising environment.
My advice is this:
- Restate your mission and purpose with clarity.
- Clear mission statements
- Publish your actions plans
- Communicate your mission and purpose with your donors better.
- Communication is the key to successful fund raising.
- Explore new methods of communication
- Do not abandon the old tried and true methods of communication: a personal visit, a warm hand shake, a face-to-face visit.
- Always make a clean and clear ask. Ask your donors for their support! Always Ask.
- Inform your donors of your successes and, believe it or not, your failures too. Such information makes your donors more a part of your process.
- Donors are more educated and sophisticated today; most can spot hype and hyperbole; when you communicate with your donors, tell them the truth.
- Discuss your failures and tragedies. Trust me on this one.
- Create more non-financial ways for your donors to participate in your mission and purpose with time, skills, planning and activities. A donor that has made these types of commitments to your organization will likely become lifetime committed financial supporters.
Why do People Give?
People give for a variety of reasons, but the core reason is the mission and the effectiveness of the organizations that they support.
The tax deduction for charitable organization has not gone away!
The itemized deduction for charitable contributions won’t be going away anytime soon. But because most other itemized deductions will be eliminated in exchange for a larger standard deduction (e.g., $24,000 for joint filers), charitable contributions after 2017 may not yield a tax benefit for many because they won’t be able to itemize deductions. If you think you will fall in this category, consider accelerating some charitable giving into 2017.
Thanks! I love my job and, without you, I would not be able to what I do. Thank You!
Steve Richardson, CPA