Are changes to chartitable gifts coming with the new year, and new administration?

A recent Bloomberg article by Colleen Murphy outlines some major potential changes impacting charitable giving that could come soon after President Elect Trump takes office.

The author believes alterations of charitable giving deductions could take place in the near future. Although there is no concrete plan or proposal, the House Ways and Means Committee “will develop options to ensure the tax code continues to encourage donations, while simplifying compliance and record-keeping and making the tax benefit effective and efficient.” Clearly, altering the amount one can claim as a tax deduction can significantly impact overall giving to 501(c)(3) organizations.

Another potential change is a cap of itemized deductions individuals may claim. President Elect Trump has proposed a ceiling of $100,000 for individuals and $200,000 for couples looking to subtract itemized deductions from their total tax bill. An expert claims that such a rule could diminish large-scale donations, some of which are vital to the existence of many tax-exempt organizations.

A third plausible change coming in the near-term is the overall lowered tax rates promised by President Elect Trump. Mr. Trump aims to reduce the current seven-bracket system to a three-bracket system, leading to a reduced tax burden for working and middle-class Americans. Experts are split on how this may impact charitable donations. Some believe that the reduced rate will lessen the impact of itemized deductions, disincentivizing individuals from making contributions. Another school of thought believe the reduced rates could increase donations, incentivizing individuals to “load up on deductions and decrease their tax burden.”

Finally, the author believes that some existing rules could be revamped over the next few years. Hadar Susskind, senior vice president of government relations at the Council on Foundations in Washington, stated that potential changes could include “Creating charitable giving accounts, simplifying the excise tax on private foundations and allowing the rollover of individual retirement accounts to donor-advised funds.”

Time will tell what the new year, and new administration, have in store for the nonprofit tax world.

David A. Brennen