Stewardship and Tax Policy
by: Kathe Drake
Stewardship Committee Member
Why do we give? Is it because we get a tax deduction? Since only 38% of taxpayers itemize, tax deductibility is clearly not the only motivation. Stewardship is usually a matter of gratitude to God which fuels the need to “give back.” Most of us give because we feel called to do so not because of a tax deduction.
Nevertheless, a charitable deduction can be the frosting on the cake, giving incentives to the giver to donate more due to the reduction in taxes. There has been considerable attention paid to the proposed changes to tax laws. In particular, proposed tax cuts will disproportionately benefit the highest earners. While there have also been proposed limits on charitable deductions ($100,000 for single filers and $200,000 for Married filing Jointly), the charitable deduction is preserved under some proposed plans. In any event, the impact on giving may be lessened due to the dramatic decrease in taxes for high earners. Higher incomes as well as specific vehicles such as donor advised funds (which allow for immediate deduction but continued growth until gifts are made from the fund) and gifts of appreciated stock will still allow plenty of opportunities for high earners to make charitable gifts and reduce taxation.
In addition, for those givers who do not itemize and are over 70 1/2, gifts of any or all of their Required Minimum Distributions can directly reduce taxable income while still conferring a charitable benefit.
Tax policy changes will definitely make an impact on individual taxpayers. Nevertheless Congress must pass all changes and the reaction to such broad sweeping change may be tempered by lawmakers’ reactions to the effect such changes will have on the federal budget as well as on middle class taxpayers. None of us make our giving decisions based purely on tax policy and the proposed changes to the tax law are not likely to change that. Fear not and keep giving generously!