After months of speculation, philanthropists are beginning to grapple with what the new tax law will mean for charitable giving in the coming year. The verdict: The new rules could have an impact—both good and bad—on both donor-advised funds and private foundations, according to sources in both camps.

Many members of the charitable community believe that, on the whole, the new law will offer less incentive for charitable giving in the years to come, says Ann Gill, Vanguard Charitable’s chief philanthropic officer. They worry that new provisions, especially the doubling of the standard deduction, will edge out small donors and lead to a substantial reduction in charitable contributions. (Vanguard Charitable is a donor-advised fund with $7.3 billion in assets.)

In 2017, the standard deduction was $6,350 for single filers and $12,700 for joint filers. In 2018, the standard deduction approximately doubles to $12,000 for single filers and $24,000 for joint filers. Some popular deductions, such as the state and local tax deduction and the home mortgage deduction, were limited or eliminated, making it harder to surpass the standard deduction.

Although some charities say they are worried, Gill says she does not believe the new law will cause a widespread Scrooge effect.

“We think people will be more thoughtful in planning their giving,” Gill says. Donor-advised funds allow givers to put lump sums of money into them and then spread out the donations to specific charities over time. In the year a person contributes to a fund, he or she may want to itemize deductions, while in other years the giver might want to take the standard deduction instead.

“For individuals taking this approach, a donor-advised fund can be used to ensure constant support for favorite charities, even when the charitable deduction is only taken in certain years,” Gill says.

“Tax advantages are only one of the reasons that we give to charity,” she adds. “By committing to continue supporting these organizations in the future, donors can help support their worthy causes, along with our country’s tradition of philanthropy. A donor-advised fund lets philanthropists be more flexible in their giving and allows them to marry their finances and their passions.”

People who have created private foundations are also questioning what impact the new legislation will have on their giving, says Jeff Haskell, chief legal officer at Foundation Source, which helps create and administer private foundations.

“Our clients tend to be high-net-worth individuals who will be itemizing no matter what, so the increase in the standard deduction will not affect them,” says Haskell. “But most of their giving is not tax-driven anyway. Wealthy people give to charities to make the community better, and the climate for giving is stronger than ever. Philanthropists want to honor their commitments.”

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