Besides death and taxes, we’re uncertain about everything else in this world. Besides Ben Franklin’s intelligence and understanding of the system, Tax Cuts and Jobs Act (TCJA) will have an effect on individuals and organizations alike. The lingering issue with customers has been the effects that the rise in the standard deduction will have on giving.
If the standard deduction is more beneficial than itemizing and donors find they can’t write off their donation anymore, will they still give as much?
The only way to find out is to allow it some time. However, we can expect good things considering results from past history.
Americans Reach New High in Giving
Reports from Giving USA on philanthropy shows that in 2016, American individuals, estates, foundations and corporations were able to donate $390.05 billion to charity organizations in the U.S. This number beat what was achieved in both 2015 and 2014; the years where charitable donations hit an all-time high. American individuals have continually shown that they are willing to make an impact and support a good cause; one that makes sense to them.
TCJA’s Impact on Giving
The major changes under the TCJA include:
Increase in the standard deduction to $12,000 for individuals and $24,000 for joint filers.
Elimination of personal exemptions.
Limitation on State and Local Taxes (SALT) of $10,000 (inclusive of income and property taxes).
Reduction in the corporate income tax rate.
Reduction of five of the seven tax brackets (marginal rates).
We at Network for Good are focused on fundraising best practices, not tax policy. Therefore, concerning TCJA and its impact on your nonprofit, we can only recommend that you reach out to your accountant and include donor engagement in your plan. However, to get a full understanding of TCJA changes, we called on the Coach and founder of Network for Good, John Gilchrist, FAHP, CFRE, who was live in a webinar “3 Ways the New Tax Reform Act Impacts the Nonprofit Community” which held recently. You can get to know more about what John thinks about TCJA’s changes how they’ll impact on nonprofits in our blog post here.
Keep Calm and Carry On
Although change can be frightening, overreacting could be the most inappropriate thing to do. The primary factors that leads to giving are still the same. A study conducted by Professors Sara Konrath and Femida Handy, who are both experts in topics that concern giving in psychology and economics explores why people really give. Reports from the study showed that the reasons why people give to nonprofits can be summarized into 5, including: altruism, trust, social, egoism, and taxes.
These reasons were arranged in order of priority, and altruism stands as number one, which is far away from taxes at number five. From this, we are able to establish that people give to non-profits not because they’re selfish, and want to benefit in taxes, but because they really want to help others. This is our belief at Network for Good.
The goal of every nonprofit is to be the vehicle that will bring about that much needed change. Things don’t just happen, you work for them. Tax laws can do so little. Although the change in TCJA may affect giving habits, Americans have shown true philanthropy time and again. Even when recession was at its highest, Americans were still able to give above $300 billion to nonprofits.
These changes by the TCJA forces nonprofits back to the conversation of how they’re affecting the communities within their sphere of influence. And considering that donors would have to donate without expecting any tax break, it makes their donation a lot more remarkable. There’s no better time to let your donors in on how their donations directly impacts the lives of the people in the community. Check out our “10-Point Checklist to Make the New Tax Laws Work for Your Nonprofit” to get a better insight on donor engagement, and also draw inspiration.
As aforementioned, altruism is undoubtedly the biggest factor for donations. The level to which your donors are generous is what determines how easy the work would be. Always tell them how much their donations mean to you and the people that receive it. Basically, let them be aware that they are the reason why the organization is successful. Analyze and run checks on your organization’s date using Network for Good’s donor management system. By doing this, you will know where to put in effort and get the best results. Keep on
Continue to cultivate the loyalty of your donors that give small gifts; the donors that may not be affected by itemized taxes. Look at their giving history.
For how long have they been donating to you? Maybe it’s time to demand more from them. However, if your organization relies on midlevel donors, make marketing and outreach resources available to them. This way, you would be able to capture a wide range of donors. When you reach out to your biggest donors, ensure that you make them understand how much their gifts means to your organization, and how much impact it is able to create.