The newly signed tax law, which will affect taxpayers starting this year, has everyone talking. If you are in a management position of a nonprofit, the law contains news that will more than likely affect your organization’s fundraising. You will want to know about these changes to the tax laws and the ramifications they will have on your organization, which may lead you to make changes in your fundraising efforts. Let’s take a look at the changes and strategies to help mitigate any potential negative effects:
The new law nearly doubles the standard deduction for both single filers and married couples. This will substantially reduce the number of taxpayers that can benefit from the charitable contribution deduction. While this provision will provide a higher overall deduction for many taxpayers, it is expected to decrease charitable giving, because only those who itemize their deductions will get the benefit of a charitable contribution deduction.
Those who typically give smaller donations may not be as apt to give as they have in the past. Unless high-income donors support your nonprofit, you may see a negative impact in your budget starting this year.
Unfortunately, this news doesn’t help your organization; you still need donations to stay solvent. So, how can you still raise the funds you need? Here are some ideas to consider:
- Focus on how you are communicating with donors about your organization’s mission. You need to make sure communications are less about the tax breaks that donors can receive, and more about your mission. For example, if you are an animal shelter, focus on the animals you’re trying to save; if you are an organization helping with food distribution, remind donors how much they will be helping those in need of food.
- Look beyond monetary donations and, instead, hold fundraising events. Anything from a formal gala to a summer carnival can help you gain the funds you need without relying on traditional donations.
- You may want to consider asking donors for appreciated stock donations. When the stock market is doing well, donors can give appreciated stock. The tax benefits, which include deducting the amount of the charitable donation and escaping the unrealized gains on the donated stock, could make appreciated stock donations an attractive option for many donors.
- Have your donors consider “bunching” their contributions they planned on giving over multiple years into a single tax year, thus getting the benefit of the itemized deduction at least for that year.
Although this list is not all-inclusive, the basic tips listed above should start you thinking about how to best adjust to the new normal. We’ll be writing more in the future about the challenges nonprofits face as a result of this law as we see how events unfold. If you have more specific questions about how to best handle donations in light of the new tax law, we recommend you speak with your financial advisor to get qualified advice.