Tag Archives: donations

Charitable Giving Under the New Tax Act – The Standard Deduction Bump

One of the more visible changes from the Tax Act will be the increase in the standard deduction. When completing an annual tax return, a taxpayer has the choice to either take a standard deduction or to itemize deductions. The standard deduction is a flat dollar amount which reduces your taxable income for the year, with the same standard deduction amount applying to every taxpayer who takes the standard deduction. The itemized deduction instead allows a taxpayer to deduct a number of different expenses from throughout the year, including certain medical expenses, mortgage interest, casualty and theft losses, state and local taxes paid, and charitable contributions. Whether a taxpayer uses the standard deduction or itemizes his or her deductions will depend on whether that taxpayer’s itemized deductions exceed the standard deduction amount.

In 2017, the standard deduction amount was $6,350 for single taxpayers and $12,700 for married taxpayers filing jointly. The Tax Act has nearly doubled these amounts for 2018, with the standard deduction increased to $12,000 for single taxpayers and $24,000 for married taxpayers filing jointly. Limitations have also been placed on deducting state and local taxes (capped at $10,000) and on mortgage interest (limited to new loans, capped at $750,000).

Taxpayers now have a higher standard deduction amount they need to pass before itemizing their deductions and they have more limited expenses available in order to get over that bar. Fewer people will be generating the expenses needed to make itemizing deductions worthwhile. The Tax Policy Center estimates that the percentage of taxpayers itemizing deductions will drop from 30% to only 6%.

If fewer taxpayers are itemizing their deductions, the tax benefits of charitable giving will be available to fewer taxpayers. The Tax Policy Center estimates charitable giving to drop anywhere from $12 billion to $20 billion in the next year. Taxpayers may instead bunch their charitable gifts into a single year, itemizing their deductions in such a year while using the standard deduction in subsequent years rather than spreading out these gifts over a stretch of years.

People charitably give to their favorite organizations out of a humanitarian desire to help less fortunate people and to benefit the wider community; a smaller tax incentive will not change this. But the smaller tax incentive is expected to have a negative impact both for a taxpayer’s ability to deduct charitable gifts and for the amount of gifts charitable organizations expect to receive.

Jamie E. Koepsel
jkoepsel@williamsparker.com
(941) 552-2562

Florida Charities Subject to New Conflict of Interest and Financial Reporting Obligations

Amendments made during the 2014 Legislative Session to the Florida Solicitation of Contributions Act (the “Act”), and which became effective July 1, 2014, increase the oversight and regulation of charitable organization, sponsors, professional fundraising consultants, and professional solicitors.  The Act generally regulates certain persons and organizations conducting solicitation activities.  Among the many changes to the Act are:

  1. Conflict of Interest.  Charities subject to the Act are now required to adopt a conflict of interest policy for transactions between the charity and certain related parties, such as directors, officers, and trustees of the charity.  These persons must annually certify that they are in compliance with the conflict of interest policy, and a copy of such annual certification must be submitted to the Department of Agriculture and Consumer Affairs (the “DACA”) along with the charity’s annual registration statement provided to the DACA.
  2. Annual Financial Statements and Reports.  Charities subject to the Act previously could elect to include audited financial statements with their annual DACA registration statement.  However, the new law now requires most charitable organizations to file a tax return and financial statements.
  3. Supplemental Information.  Charities with more than $1 million in total revenue and that spent less than 25% of their total annual functional expenses on program services costs must file supplemental information with DACA regarding the funding of administrative functions, including salary and travel expense information, identifying the name and sum paid to all employees, consultants, and service providers in excess of $100,000, and reporting transactions between the charity and officers, directors, and trustees (including immediate family members and related entities).

An article on the recent amendments to the Act can be found here:
Amemdments to Chartible Solicitations Act 2014

Michael J. Wilson
mwilson@williamsparker.com
941-536-2043