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November 28, 2017
Tax reform has taken center stage in Washington, with competing bills in the Senate and House of Representatives. With the potential for further revisions in the near future, there is still much that is unknown when it comes to the new tax plan, including whether it will pass yet this year, next, or not at all. Understandably, donors may be wondering how this tax picture could affect their charitable giving.
To the extent that current drafts predict what the final legislation could look like, charities may be in for tough times ahead. The Tax Policy Center recently estimated that the House’s proposal to double the standard deduction could decrease charitable giving in the US by $12 billion to $20 billion in 2018 alone. Another provision—the gradual repeal of the estate tax—could cost charities another $4 billion in the coming years. Nonprofit leaders continue to meet with members of Congress to try to determine ways to mitigate the impact of these changes.
“Preserving incentives in the tax code for charitable giving would go a long way toward boosting the work of charities nationwide,” said Vanguard Charitable President Jane Greenfield. “Nonprofit organizations occupy an important place in our society, fulfilling roles and providing services that might otherwise fall to the federal, state, or local governments, or that might be neglected altogether.”
In March, Vanguard Charitable examined some of the tax reform proposals from earlier this year and offered guidance on charitable giving in a time of uncertainty. Our advice at that time still holds: In a climate of uncertainty, donors should focus on what is certain.
For instance, record stock market growth means that donations of appreciated securities are still one of the most tax-effective gifts you can make. And regardless of the future tax environment, today’s charitable contributions continue to provide much-needed support to nonprofit organizations and the people, communities, and causes that they serve.
While the details of tax reform are negotiated, charities may suffer if too many of their donors take a wait-and-see approach. Strategic philanthropists should try to look past the unpredictability and focus on the charitable missions and the causes they care about. Donors’ support at this critical time can help nonprofits navigate the ambiguity and continue their valuable work.