Charitable contributions were down for 2018 by most reports but should stabilize in the future, according to Paul M. Roy, an attorney on the private client and tax team of Withers, a global law firm.
Charities were hurt by recent changes in the federal tax law that increased the standard deduction and eliminated the tax break for many taxpayers for giving to nonprofit organizations.
Roy, who is counsel in the firm’s New York City and New Haven and Greenwich, Conn., offices, focuses on domestic and international tax and estate planning with a particular emphasis on philanthropy. He advises private foundations and other non-profit organizations on tax matters and counsels wealthy individuals on giving.
“People with less than $250,000 in annual income may have cut back on their donations because of the tax law changes, even though the economy is still good and the market and 401(k) assets are up,” Roy said, “but giving should stabilize for the next few years as people get used to the higher standard deduction level.”
Last year, individual giving declined 1.1 percent to $292 billion, and total giving was virtually flat with a growth rate of 0.7 percent to bring it to $427.71 billion for the year, according to the 2019 Giving USA report published by the Giving USA Foundation and researched by the Indiana University Lilly Family School of Philanthropy.
“People with incomes above $250,000 to half a million or so can set up donor-advised funds to bundle contributions in one year to receive a tax deduction. Financial advisors can help in those areas,” Roy said. For higher-net-worth individuals, the standard deduction is not going to matter in their tax planning.
“High-net-worth individuals frequently set up charitable remainder trusts or charitable lead trusts to reduce taxes,” he added. Charitable remainder trusts pay the donor or family for a period of time and the remainder goes to charities. Charitable lead trusts contribute money to a charity first and then to the donor or family.