Giving Maximize your impact before tax reform arrives
During this holiday season, as we celebrate where our journeys have taken us, we hope you will think about Wabash and how your philanthropic support enhances and changes the lives of students both now and in the New Year.
It is also during this season that our nation’s current administration seeks to bring tax relief to Americans. The Tax Cuts and Jobs Act has just been approved by Congress and is expected to be signed into law by the president very soon. It will affect the income tax of both businesses and individuals and the federal estate tax on the estates of certain high-net-worth individuals.
- The tax rates for corporations and certain pass-through businesses will be significantly reduced.
- Income-tax rates will be lower for most individuals.
- The standard deduction will nearly double.
- The personal exemption will be eliminated.
- Some deductions, such as those for state and local taxes and mortgage interest, will be limited.
- The federal estate-tax exemption will increase to $11.2 million in 2018.
Except for increasing the deduction ceiling on cash gifts from 50% to 60% of AGI, the effect on charitable giving is more indirect than direct. The deduction of charitable gifts by itemizers and the gift instruments have been preserved. The income-tax savings from charitable gifts will generally be somewhat smaller because of the lower tax rates and because a larger number of individuals will not itemize deductions and thus will not realize tax savings from their gifts.
While time is limited before the end of 2017, here are some strategies that might be possible:
- Accelerate 2018 charitable gifts by December 31, 2017, to maximize tax savings.
- Those whose tax rates are higher this year than they will be next year, or those who might not itemize next year due to the higher standard deduction, will benefit from "bunching" charitable gifts into the current year.
- Defer income to 2018.
- Those who can control when they receive income may choose to defer some of it until 2018 when tax rates are lower.
- Make an IRA rollover gift.
- Those over the age of 70½ who have not yet taken the required distribution from their IRA might ask their IRA administrator to make a direct tax-free transfer to charity. The ability to make such transfers was not affected by the new law.