The tax cuts that went into effect this month have nonprofits and donors alike scrambling to learn more about how they might affect charitable giving. While these changes to the tax code could have a lasting impact on many charities, the Alliance is thankful for the support of many faithful, consistent donors. Nevertheless, it is important to understand the effect of these changes on gifts to the Alliance.
First, a disclaimer: The Alliance does not offer tax advice, and suggests all donors consult with a tax professional regarding personal finances and the tax code.
What changed?
- Congress introduced temporary tax cuts for individuals, starting in 2018 and expiring after 2025. Perhaps most consequently, it doubled the standard deduction that taxpayers can take—raising it to $12,000 for singles and $24,000 for joint filers.
- The estate tax threshold was also doubled to around $22 million, so the tax applies to fewer estates.
Some nonprofits worry that the changes to the standard deduction and estate tax mean that fewer donors will have the incentive to make charitable gifts as tax write-offs. Accordingly, individual giving is projected to decrease across the country, prompting many charitable organizations to lower expectations for revenue and capacity in 2018.
What did not change?
While the tax overhaul certainly includes some major changes, many provisions relating to charitable giving remain intact.
- Donors can still avoid paying capital-gains taxes on stocks given to charity, for instance.
- And politicians made no changes to gifts made directly from individual retirement accounts. People over 70.5 years old are required to make minimum yearly distributions from their retirement accounts—distributions that are taxed by the government. But donors are still allowed to give up to $100,000 per year from these accounts to charities, which counts toward the minimum disbursement without being taxed.
What do the tax cuts mean for ending homelessness?
The recent tax cuts are expected to significantly expand the federal budget deficit—which can be used as an argument to cut spending on vital programs. Federal investments in homelessness services and prevention have been incredibly effective in communities across the country. As the tax cuts create new pressure at the federal level, it’s important that advocates continue to call for increased funding of the McKinney-Vento Homeless Assistance Grants and defend important programs like Medicaid. It will take a continued and growing investment of federal resources, in addition to philanthropic work, to end homelessness.
What do these changes mean for the Alliance?
Financial changes always bring uncertainty, but the Alliance remains committed to our mission to end homelessness. We need our faithful donors now more than ever, and your gifts are making a measurable and valuable impact toward ending homelessness for every child, family, and individual in the United States. We believe that supporting this mission is a moral imperative—regardless of whether or not one gets a charitable deduction.
Thank you very much for your continued support. For any questions regarding charitable donations to the Alliance—cash, check, stock, or other—please contact Development Coordinator Jasper Vaughn at jvaughn@naeh.org.