Tax Reform Could Have ‘Chilling Effect’ on Charitable Donations

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Charitable giving could take a hit under the federal tax law, advisers say.

Now that the standard deduction has been doubled – to $12,000 for a single filer and $24,000 for married couples filing jointly – fewer people will likely itemize their deductions, including charitable donations, which could negatively impact giving, tax advisers say.

Or, wealthy individual donors who typically itemize and write-off large deductions may choose to bunch them together in a single year just to reach the $24,000 threshold as a way to circumvent the limit. However, that could prevent donors from giving the next year, advisers said.

Carlton S. Chen, an attorney at Kurien Ouellette in West Hartford and Robert Karn, a principal with Farmington accounting firm Karn Couzens, said the changes in claiming deductions on charitable gifts require careful planning.

“If you cannot deduct charitable contributions because you don’t reach the $24,000 threshold, you might decide not to donate or not to donate as much as you have in the past,” said Chen.

“Well-to-do people make nice charitable contributions,” said Karn. “If they lose their deductions it has to have a chilling effect.” That doesn’t mean charitable contributions are dead, said Tim Barry, a partner with West Hartford accounting firm blumshapiro.

“The main reason why people give is to help an organization out,” he said, “so some people who are going to take the standard deduction will still contribute to the charity and would want to give each year for the benefit of the charity’s cash flow.”

Read the original article posted here in the Hartford Business Journal >>

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statutes, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.

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