President-elect Donald Trump’s tax proposals are changing the landscape for year-end charitable giving, prompting some large donors to give now rather than later.
If Trump gets his tax plan through the Republican Congress, charitable donations will be capped at $200,000.
“Wealthy clients who have been thinking of making a major donation sometime in the future are now considering doing it this year in case the tax laws are changed next year by the incoming administration,” says Adrienne Penta, senior vice president and executive director of the Brown Brothers Harriman Center for Women & Wealth.
“There also is talk of limiting the donations of appreciated assets, but it is unclear what might be enacted,” she says. “Some clients may want to flag this as an opportunity to make these donations now before any changes are made to the law.”
At the same time, if income tax rates are to be reduced, which is another part of the tax proposal, wealthy people may want to push income into next year rather than paying higher rates this year, she says.
Those making smaller charitable donations may want to put them off to see if the standard deduction will be raised to $30,000, as has been proposed. If it is, donations could be made without keeping individual track of them because they would not push the taxpayer over the standard deduction cap.
Also left up in the air are what changes might be made to the gift tax or whether the estate tax will be eliminated under the Trump administration.
“All of this means that for this year it is even more imperative to look at individual situations. Each client is going to need a unique individual analysis. There is no easy answer,” Penta says.
Even with these proposed changes in the wind, advisors and clients need to be cautious about making abrupt changes.
“What is being proposed is the most comprehensive tax reform since the 1980s, and that just does not happen overnight,” she says. “Reform has a lot of moving parts, so this is at least a months-long process.