In December 2017 Congress passed the controversial Tax Cuts and Jobs Act–the first major tax reform in nearly three decades. Many analysts believe new provisions in the Act will dramatically change giving behavior. Others say that charitable giving isn’t motivated by tax benefits, it just provides tax efficiency in specific scenarios.
We’ve spoken with two experts from our Professional Advisors Council to share strategies for keeping giving on track, regardless of tax reform. Dan Morris is a Financial Advisor with High Point Financial Group and Leslie Schaus is a tax partner at Strategem CPA, a public accounting firm.
Q: Thank you both for partnering with Community First Foundation by joining our new Professional Advisors Council. Can you tell us who you serve and what’s your specialty?
Dan: I am a financial advisor with High Point Financial Group. We work with nonprofit organizations, businesses and individuals with financial planning. I focus on clients with needs concerning their business and its future, managing reserve funds, retirement and legacy planning.
Leslie: In addition to conducting audits and other CPA functions, Strategem CPA specializes in serving the owners of privately held companies in various stages of growth.
Q: There seem to be opposing views on how the Tax Cuts and Jobs Act will impact the nonprofit sector. Do we need to be worried?
Dan: I think there are still tax advantages within the new tax code. Taking the new, high standard deduction rather than itemizing will probably make sense for many families. Yet people who use assets for giving (such as stock, bonds and property), rather than cash, may receive a variety of tax breaks.
Leslie: I don’t think we’ll really know the impact of tax reform on giving for a few more years. Families with incomes under $200,000 who don’t have mortgages will be better off taking the new standard deduction. But families with mortgages will still itemize for mortgage and interest deductions and then receive additional deductions for charitable giving. It’s good to remember that overall the tax rate has decreased by 2 percent. That means more resources left for charity.
Q: Can you talk about the advantage of giving through assets?
Dan: It makes a difference whether someone is giving through cash vs. assets. Older individuals in particular may no longer have income–so they’re charitable through assets like appreciated stocks, bonds and property. They may avoid capital gains tax on these asset donations, and this has not changed with tax reform.
Leslie: Giving through assets is typically an option for wealthier individuals. For example, a stock holder who bought low and sold high can donate the appreciated amount and take a charitable giving deduction. This is still a good strategy.
Q: How would you advise nonprofits who believe donations to their organizations will decrease because of tax reform?
Dan: I recommend these strategies:
Leslie: In addition to Dan’s recommendations, I would add these:
Q: What would you say to small nonprofits with limited staff and little experience in more sophisticated strategies?
Dan: A nonprofit’s development director need only know enough to pose options. Just offer enough information to trigger your donors’ desire to learn more. From there a nonprofit can consult with its finance committee. Or it can direct the donor to an advisor with experience in charitable giving and tax mitigation. The advisors on Community First Foundation’s Professional Advisor Council are experienced in charitable giving strategies, and a great resource for their nonprofit partners.
Q: Thank you for sharing your expertise. Any last thoughts?
Dan: I’m very optimistic about the future of giving. Tax reform hasn’t negated all charitable giving tax benefits. It is important is to know your donors and provide solutions based on their particular goals.
Leslie: In a perfect world I’d like to think people give solely because they want to make a difference. Previously the tax code allowed people to give from their heart as well as receive tax benefits. Now we just need to be more creative to get both.
To learn more about donor-advised funds and other tax strategies, contact Community First Foundation’s Philanthropic Services at 720.898.5900 or philanthropy@CommunityFirstFoundation.org.
Learn more about our Professional Advisors Council at https://communityfirstfoundation.org/about-us/professional-advisors-council/