Why Tax-Deductible Is No Longer A Big Deal

Tax laws -- enough to drive you crazy, right?

Well, pay attention. This latest round of tax changes may be killing your donations.

Here's why -- and what you should be doing instead.

You now get a much larger standard deduction than before. It's now up to $12,000 per person, with additional allowances for people who're over 65 or blind. Great, right?

Maybe for you and me, but not so much for your charity.  The number of people who itemize with Schedule A is now down to an estimated 12% vice 31%.

Why does that matter? Well, if your group is a 501(c)(3), one of the major incentives for donating is that your donation is tax deductible. It works like this: if you donate $100 to a charity and you're in the 30% marginal tax rate, that means that donation really only cost you $70.  That's a deal!

BUT -- that's only if you're itemizing on Schedule A.  

Translation: less incentive to donate.If you're not itemizing, you can't deduct that $100 specifically. It's just lumped in to your $12000 standard deduction.

This isn't just speculation. The IRS' own stats show that charitable donations are down since the 2017 Tax Cuts and Jobs Act was signed into law. 

For small charities, this means that 501(c)(3) status may no longer be much of a big deal. While it still represents a sort of respectability -- as though that implies some sort of oversight -- it no longer is a major factor for most of your donors.

So what's the answer? Understanding why your donors really give, and how to build those strong bonds with your community. It's always been important and never more so than now.

 

  Want to know more about how to tap into your donors' brains?  Check this out

 

Further Reading:

https://www.marketwatch.com/story/individual-americans-are-giving-less-to-charity-after-stock-market-volatility-and-tax-law-changes-2019-06-19

 https://www.marketwatch.com/story/americans-slashed-their-charitable-deductions-by-54-billion-after-trumps-tax-overhaul-2019-07-09

https://www.irs.gov/statistics/filing-season-statistics

https://taxfoundation.org/90-percent-taxpayers-projected-tcja-expanded-standard-deduction/

 

 

 

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