By Michael Freeman
The Salvation Army NEO
America is a generous country. Over 67 percent of American households give to charity.
While some people give for tax reasons, many — if not the majority — open their wallets because they are convinced that the work of their favorite charity is vital.
With the passage of the Tax Cuts and Jobs Act in December 2017, the philanthropic community is standing back to see if this is true. Do Americans give for personal tax savings or from a place of true charity?
The new tax law has doubled the standard deduction — the preset amount all taxpayers are allowed to lop off their taxable income — from $6,500 to $12,000. This will reduce the number of taxpayers who itemize deductions on their tax return from 47 million to 19 million. Simply put, very few of us will now deduct our charitable contributions.
Options remain, however, that can make us tax-savvy stewards. Consider this: Rather than cash, donate appreciated stocks. With the fervor of the current market, your investment may have seen handsome growth.
Here’s the catch: When you sell that stock, you are responsible to pay a capital gain tax. If however, you have owned that stock for over a year, it can be donated to charity and the gift passes to the charity without any tax due. For itemizers, the full amount of the stock’s value on the day it was donated qualifies as a charitable deduction.
For future “planned giving” — which means giving after you have died — there is a plethora of ideas that enable you to make an impact from beyond the grave. My father had a friend who had been financially successful in the trucking business. At his death, I asked my dad how much the man had left behind. My dad replied, “Every penny.”
I don’t want to appear morbid, but these are matters worthy of our consideration. One of the best ways I have seen to make that final life gift is through your IRA. I am always encouraging donors to give a portion of their IRA to charity. After all, if you give it to your relatives, five minutes after they get it, the tax man will be knocking at their door. Give family the cash; give charity the IRA.
So, we’re back to the original thought of what will happen to philanthropy in the light of the new tax law. Having worked with donors for 23 years, I believe that most will continue to give as they have in the past.
Speaking for The Salvation Army, I can say that our supporters’ impetus for giving is the recognition that day in and day out, their contribution empowers us to wade into human misery: hunger, homelessness, addiction, incarceration, human trafficking. The list goes on. We have been tending to Clevelanders and folks throughout Northeast Ohio since 1872.
Michael Freeman is the director of planned giving for The Salvation Army in Northeast Ohio. For 23 years, he has assisted donors in charitable planning by crafting gifts through their wills, trusts and other pre-arranged gifts.