The newly passed Tax Reform (The Tax Cuts and Jobs Act) that was signed into effect in December of 2017 brings many changes to a variety of industries including nonprofits. It's more important than ever for nonprofit organizations to understand the coming changes and how to implement them. Now is a good time to speak with your accountant so they can help you decipher, in a timely manner, what all of these new changes could mean for your organization.
We've highlighted two of the many changes with the new law below:
Estate Tax Exemption Increase
- The gift and estate tax exemptions double from $5 million to $10 million (adjusted for inflation) per individual beginning in 2017. This provision will sunset in 2026, returning the exemptions to their current level.
- An increase in the estate tax exemptions could significantly reduce the incentive for people (especially wealthy individuals) to make charitable contributions, as more property can now be transferred to beneficiaries tax-free.
Charitable Contribution Deduction Limit Increase
- The charitable contribution deduction limit increases for an individual to 60% of his or her adjusted gross income (AGI), up from the current limit of 50%.
- At first glance, an increase in deduction limits appears to be an incentive for high-income donors to give more to charity, as they can claim more of their donations as a charitable deduction. However, this is unlikely in reality—especially when considering that the population of tax payers who actually do give up to 50% of their AGI currently is quite small. There may not be many more individuals who would give up to 60% of their AGI.
You may download the full list of changes by clicking the button below.