Today’s guest blog post is written by Kevin Patterson, Senior Account Executive, PatronManager.
On December 20, 2017, Congress managed to pass large-scale tax reform, the “Tax Cuts and Jobs Act” (TCJA). While the long-term implications for the economy might not be fully realized for years, the tax bill did alter the landscape for charitable organizations. Now three months into this new world of TCJA, let’s look at what this might mean for your organization.
While there was much lobbying on Capitol Hill, the central policy change that will likely impact non-profits the most is the increase in the standard deduction.
Tax deductions are a way to subtract some expenses that individuals pay from their overall taxable income, resulting in a reduction of their tax bill. The tax code allows for two choices, claim a standard deduction or itemize all expenses to claim a higher deduction. According to the Tax Foundation, approximately 65.8% of tax filers take the standard deduction.
So for the remaining 30.1% who itemize, adjusting the amount of the standard deduction potentially becomes a critical factor — a higher standard deduction would mean less of a need to itemize to gain the same tax benefit. Another important factor is that taxpayers with higher incomes are more likely to itemize deductions. They are also more likely to contribute more of their income to non-profit causes with which they identify and receive the resulting tax benefit.Read the Article