Introduction

The 2017 Tax Act made three significant changes that affect incentives for charitable giving:

1. Lowered individual income tax rates, effectively reducing the value of a charitable contribution deduction.

2. Increased the standard deduction, so that contributions when combined with a taxpayer’s other itemized deductions amounting to less than the enhanced standard will not generate a tax benefit.

3. Increased the charitable contribution deduction percentage cap to 60% from 50% of adjusted gross income, thus allowing more of a deduction for those to whom this applies.

The tax deduction for charitable donations that can be taken on a tax return is limited by a cap. The cap depends on what was donated (e.g., cash versus appreciated property) to what type of charity (private versus public). Amounts in excess of the cap are suspended, carried-forward and remain available to be used in the following five tax years. The annual deduction limit for cash contributions to public charities increased to 60 percent (from 50 percent) of adjusted gross income. This will sunset back to 50 percent on December 31, 2025.

Each person’s tax scenario is unique. If you make regular or significant charitable contributions, you should project your taxes before and after the sunset to determine if you might benefit by timing the donation deduction and/or bunching several years’ worth of charitable gifts into one year, considering whether it should be in 2025 or 2026.

Work with your Glenmede team and personal tax advisor to determine if accelerating or bunching deductions would be better prior to 2026. 

This material provides information of possible interest to Glenmede’s clients and friends, and does not provide investment, tax, legal or other advice. Any advice in this communication is not intended or written by us to be used, and cannot be used, for the purpose of (i)avoiding penalties that may be imposed by any governmental taxing authority or agency, or (ii) promoting, marketing or recommending to another party any matters addressed herein. Any opinions, recommendations, expectations and/or projections expressed herein may change after the date of publication. Information obtained from third-party sources is assumed to be reliable but may not be independently verified, and the accuracy thereof is not guaranteed. Any potential outcome discussed, including but not limited to performance, legislation or tax consequence, ultimately may not occur due to various risks and uncertainties. Clients are encouraged to discuss any matter discussed herein with their tax advisor, attorney or Glenmede Relationship Manager.