In church circles much of the excitement around the CARES Act has been around the possibility of a church receiving a forgivable loan to cover payroll and other basic expenses during this period. But it also gives us two important pieces to the charitable giving puzzle that should not be overlooked.
In the last two years fewer people are itemizing their tax deductions, instead choosing to take the standard deduction because it’s a higher number than actual deductions and the process is easier. As a result, these folks have no incentive for charitable giving. But beginning this year those taking the standard deduction can also take up to $300 in deductions for charitable giving.
The reality is that $300 isn’t going to move the needle in a significant way for most churches, but it is something we can remind our parishioners about and I am happy that Uncle Sam is working to encourage more charitable giving in these times.
The second piece won’t affect as many people as I would like it to, but it can have a significant change for some.
Currently you can only deduct 60% of your Adjusted Gross Income on your taxes. So if you have income of $100,000 and make charitable gifts of $100,000 (I know, I know, but bear with me) you could only claim $60,000 of that you would have to carry over the remaining $40,000 onto next year’s taxes. For 2020 that 60% rule is eliminated so you could claim the entire $100,000 in giving in one year, effectively eliminating income tax for the year.
The elimination of this ceiling is only for cash donations. Those giving appreciated property such as stocks or real estate still have their deduction capped at 30%.
So who does this affect? Well it would be a good time to have Bill Gates as a member of your church, but think about who has a relatively low income but could give away a big gift. Retirees who live frugally but have accumulated assets would fit into this category.
There is very little if any tax benefit to leaving the church in your will. But this may be a situation where an older member or couple would choose to do their legacy giving now, while they are alive and paying taxes, rather than waiting until they are gone.
Are you ready for that conversation? If such a member came to you and asked what the church would do this year with a gift of $50,000, $100,000 or more, would you have an answer? Would that answer speak of the aspirations of the congregation’s leaders or the scarcity that is revealed when the answer is along the lines of “We could finally pay our bills.”
This is a time when people are thinking differently about money. The churches who benefit from the shift in thinking will be the ones who are doing so differently as well.