Charity Squeezed by Tax Reform | Financial Buzz

Charity Squeezed by Tax Reform

Many charities have expressed concern that they will have a hard time attracting donors due to the tax changes brought by Congress in 2017. The urgency is there as fundraising is best done during the fall. The time is only a few months away. President Donald J. Trump pushed in a tax reform law which doubled the relevant standard deduction. This is the deduction which taxpayers could take on taxes. The Trump administration upped it to $12,000 for single individuals. The amount goes up to $18,000 and $24,000 for the heads of household and married couples respectively. The last amount is applicable for both filing jointly and also for the surviving spouses.

Less money given

As per Tax Policy Center, the present law will cut the population of people itemizing their respective charitable contributions. These could increase by as much as 16 million. A majority in this bracket are regarded as high earners. Charities understand that people give not exclusively for the tax incentive- but it helps. The tax scheme encourages individuals to offer a little bit more money to charity than they originally planned. This law will inhibit millions to give a little amount less. This little amount adds up to billions of dollars not given to charity as a whole.

These concerns are valid. A report published by Fundraising Effectiveness Project showed total revenue diverted to non-profits dropped 2.4 percent during the initial three months of 2018 when compared with 2017. Total donor numbers dipped 6.3 percent on the Year-Over-Year basis. This is while the retention rate of donors dipped 4.6 percent. The retention rate measures the donor numbers contributing to the same organization every consecutive year. New donor numbers plunged by 12 percent. In money terms, about $20 billion is not given to charity. This is a significant amount. Multiple charities are stepping up their efforts to make sure that their present donors continue to give the same amount. These charities are trying hard to make sure that the same amount of money continues to flow in.

Donor fatigue

Another issue is donor fatigue. As per the FEP, donations amounting to $1,000 or more witnessed a 47 percent YOY increase during 2017 fourth quarter. This is as taxpayers wanted to make their contributions prior to the brand-new tax laws coming into effect. Many taxpayers would thus give fewer amounts of money compared to 2017. The charitable industry is now increasingly dependent on a few select wealthier donors.