Changes in Tax Law May Change Giving Patterns, Too!

Expanded use of the IRA Required Minimum Distribution (RMD) to make gifts to charity. Taxpayers over 70 ½ can designate some or all of their IRA (but not 401k, simple or SEP) required minimum distribution (RMD) (up to $100,000) to go directly to a 501(C)(3) charity, including religious organizations, and have that amount excluded from their income. This is an especially valuable tool with the new, larger standard deduction. There are some restrictions (gifts cannot be directed to a private foundation or donor advised fund), so it is best to advise your donors to consult their tax preparer.

Will people start bunching deductions? With the new larger standard deduction many taxpayers who itemize deductions every year could save federal tax if they bunch deductions every other year. For example, a couple who had $20,000 of itemized deductions ($10,000 of taxes and $10,000 of charity) would itemize every year under the old rules and see a tax advantage. Under the new rules, the couple would take the $24,000 standard deduction in the first year, and for the following year, payers could “bunch” their deductions by prepaying next year’s charitable contributions in December. These donors would have $10,000 of taxes and $20,000 of charity every other year with a $30,000 schedule A itemized deduction, saving them $1,440 of  federal tax at the 24% bracket.

Bottom line, it’s important that your contributors know that their contributions are needed to continue the important ministries of the church, and to please give generously. Doing the work of God’s people is important stuff: we all need to be reminded of our part often, and especially in times of change!