The New Tax Law and Your Older Donors

When we think about our older donors, we often think about them as potential planned givers.  Truth is, by the time your donors are in their 70s, their deferred charitable giving may have already been planned, though, of course, it never hurts to ask.  On the other hand, the new tax bill may give you another path into their philanthropic hearts.

As we’ve all heard, the new tax bill will make it unappealing for many middle-class people to itemize.  For nonprofits, this takes away one incentive (but, as we note above, not all) to make a charitable gift.  If you don’t itemize, you cannot take advantage of the charitable tax deduction.

While we don’t think that will stop philanthropically minded people from giving, it never hurts to let people know how they might be able to not itemize and still get a deduction.

For those of us (and yes, that is me) there are many things that go along with our age.  One of those is the required minimum distributions (RMD) we must take from our retirement plans.  Generally, you have to take RMDs from any retirement account in which you contributed tax-deferred assets or had tax-deferred earnings. These accounts include:

  • Traditional IRAs
  • Rollover IRAs
  • SIMPLE IRAs
  • SEP IRAs
  • Most Keogh accounts
  • Most 401(k) and 403(b) plans

The bad news about this is that those distributions are taxable.  Unless you give them directly to a charity (do not pass go and you do not touch them).

For those of you who don’t have the advantage of age, there are DAF’s or Donor Advised Funds.

Funds that are put into a DAF are deductible in that year.  Then, whenever you want, you “advise” the organization that holds and invests your DAF.

For this strategy to give you a tax deduction, you have to itemize in the year you put funds in.  Talk with your tax advisor as when, how, and how much you should do this.  One thing I can tell you is that this is not a way for us elders to get double the tax deduction.  You cannot get a tax deduction by using your retirement distributions to fund a donor advised fund.

For nonprofits, age-appropriate tax advice can serve a number of purposes.  By reminding your older donors of this opportunity, you show yourselves to be thoughtful, knowledgeable, helpful as well as running an amazing organization that does incredible things.

If my organization has a robust planned giving program and has developed relationships with (and/or built a council of) tax specialists, see if they will partner with you to go out and talk to your donors one-on-one or in small groups.

You can also ask one or two of them to write an article on just this subject for your newsletter.

And now you are cultivating both your donor and a tax professional.

If you haven’t developed these relationships (or haven’t started a planned giving program) what are you waiting for?

Yes, in the past, planned giving was only for large, sophisticated nonprofits.  Today, even a small organization with no professional staff can help their donors leave a legacy and ensure the future for their favorite nonprofit organization.

–Janet Levine

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