The Tax Cuts and Jobs Act (TCJA) changed several rules affecting tax incentives for charitable giving. Many of these changes have been seen as negative for the charitable sector—in particular, the increased standard deduction eliminates the need for many taxpayers to itemize deductions, thereby reducing the incentive to make charitable gifts.
Congress did include one incentive to encourage more charitable giving, by increasing the annual “contribution base” (similar to adjusted gross income, or AGI) limits for cash gifts to public charities from 50% to 60%. Because of the way in which this increased limit was inserted into the existing Section 170, the 60% limit is unavailable in many cases, in particular when donors are making gifts to both public charities and private foundations, or gifts of both cash and noncash items, such as stock, land or art.
A purported tax benefit in the Tax Cuts and Jobs Act to encourage charitable donations is illusory in many cases. This article traces how the new limit operates within the complicated labyrinth of Section 170(b)’s cross-references, as well as some basic principles regarding charitable giving and income taxes.
This article was originally was published in Taxation of Exempts, a Thomson Reuters' publication. To read the full article, please click the PDF below.