How Do the Recent Tax Changes Impact Giving?

by Barbara Barron | Posted September 30th, 2020

In the world of advancement, there are plenty of truisms and myths. Some are accurate — “People give because they are asked.” Or, said in the converse, “If you don’t ask, you won’t receive a gift.”

Some are wrong — “People give because they are looking for a tax deduction.”

Nope. Not true.

Giving is rarely about taxes. In fact, even during years when most tax benefits have been drastically reduced or even eliminated, the giving goes on. Something like 95% of Americans give charitably — somewhere. Historically, religious and educational organizations have topped the list. But people give to everything from animal rights to performing arts to social services. It’s a beautiful thing. In good times and bad, people give. We give to causes that touch our hearts.

(Small digression: I recently saw the stats on a crowdsource campaign for Breonna Taylor: Goal was $500k. So far, it has raised over $6 million from 205,000+ donors. Wow!) [Here’s the link if you haven’t given already.]

My point is that we give because we are inspired by inspiring missions. We give because we want to help make life better for other people. We give because we – in particular we Americans – have a philanthropic streak. Regardless of what you might think in our cynical times, statistically speaking, we are actually charitable people.

Kinda nice, right? Especially right now.

That said, in this time of COVID, there are some new and important elements of the stimulus package that directly affect the tax code and may positively impact charitable giving. And while perfect strangers are not suddenly going to send big checks to our schools, it is important to be sure our donors know how these changes may affect them.

It is part of our responsibility as advancement pros and stewards of donors’ gifts to be educated about how they work. It is also our responsibly to be sure we are communicating the details fluently to our community.

So, what are the basics? The first one is targeted to our largest donors. Our giving leaders.

The previous 60% adjusted gross income limit for individual charitable contributions has been suspended for 2020.

That means that the limit that allowed someone to give up to 60% of one’s adjusted gross income as a charitable deduction no longer exists. No matter how much they give.

So, for donors in this calendar year (2020), all cash contributions are now fully deductible. That might make a real difference for some and perhaps make it appealing for donors to give even more this calendar year.

The second change affects everyone but especially more modest donors. Perhaps younger alumni.

A tax filer who does not itemize their deductions – which is a lot of people – can now take a one-time deduction of up to $300 for cash gifts made to charitable organizations.

The provision is intended only for the year 2020; but in the text of the bill, it reads “taxable years beginning in 2020 …” and since it doesn’t include a sunset date, it is conceivable that it might extend beyond 2020. We don’t know that, but it is possible. Strike while this iron is hot.

Important to note that both deductions are only for gifts of cash made in the calendar year 2020. This does not cover other types of gifts or contributions made by donor-advised funds or private foundations.

So larger donors will realize a greater benefit and might be interested in making a larger gift.

Smaller donors, maybe some first-timers, will be able to deduct the cash gift up to $300 even if they don’t itemize.

Good news in this tough moment, all around. 

What can and should we do about all this? I believe it is our responsibility to fully understand these changes and what they can mean for our schools. That means:

  • We ought to read the literature. 
  • Talk it through with our school’s CFO so our offices are aligned. (Start by forwarding this article to them.)
  • Look for ways to share the information with our giving community. Pop it up on the website. Include it in the newsletter.
  • Be sure our Board and other volunteers and ambassadors in our school who talk with families about giving are fully versed.

Most of us are not financial experts and we must always remind our donors to check with their personal financial advisors to understand the implications of any gift. But it is our role to make people aware of the possibilities that lie in this moment.

In the end, this will never be the reason people give. Like I said at the top of this article, people will give because they believe in our mission. They care about our teachers. They love our community.

But let’s not take for granted the value of helpful information in an uncertain and scary time. By understanding it and sharing it clearly, you are showing your donors that you are on it. You are a trusted advisor. One more reason to have confidence in your fine organization.

Thank you for all you’re doing.  Let’s stay in contact.

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