For the clients of Impel Wealth Management, there were many good things that came as a result of the 2017 tax law changes. The tax code was simplified, eliminating many deductions and loopholes. The standard deduction was doubled for most individuals and families. And, once you got above the lowest tax bracket, rates generally dropped by 3% for most clients.
However, one unintended victim of tax simplification has been 501(c)(3) charitable organizations that rely on donations for their philanthropic operations. Prior to the new tax law being passed, approximately 46.5 million taxpayers itemized deductions. Only 18 million taxpayers itemized deductions in calendar year 2018 according to estimates from the nonpartisan Joint Committee on Taxation. This means that approximately 88% of tax filers took the standard deduction, meaning that they cannot write off their charitable donations.
Due to the fact that many more people are no longer itemizing, people are less incentivized to make charitable gifts. According to a report released in June by the organization Giving USA, individual donations fell by approximately 3.4%, adjusted for inflation, in the first year after the new tax act. We now find that many of the organizations that our clients care about are being funded at a lower level. This includes churches and faith-based schools, but it also means many organizations that serve the needs of those less fortunate.
There are a number of strategies and options for helping our clients maximize their charitable giving intentions. These include Qualified Charitable Distributions from retirement accounts for clients over the age of 70 1/2 that have to take required minimum distributions. There is also an opportunity to bunch donations every second or third year so that you can occasionally itemize. They can also include gifts of appreciated assets, typically stocks or real estate. This can also mean considering the use of a Donor Advised Fund that would allow you to make a larger gifts from time to time, possibly every 2 to 5 years, and still be able to distribute the assets to the charities you care about on an annual basis.
The charitable giving landscape has gotten more complex. This means that you need to be more intentional in looking at strategies and planning ahead. This is where the team at Impel Wealth Management comes in. We stand ready to have meaningful conversations with you about how you can keep "Moving Life Forward" for you and the charitable organizations you care about. Please let us know how we can help.