The Tax Cuts and Jobs Act of 2017, which became law last month, will be changing the financial landscape for many individuals, with alterations in the code ranging from the treatment of alimony payments to changes in the alternative minimum tax rules.
But for nonprofit organizations, one of the biggest effects of the new tax laws stems from the doubling of the standard tax deduction — to $12,000 for individuals and $24,000 for couples. Because fewer taxpayers will be itemizing deductions now, one incentive to donate to charity has been removed.
Taking advantage of the deductions still available in 2017, in December alone, 20 donors opened new donor-advised funds at the Jewish Community Foundation of the Jewish Federation of Greater Pittsburgh, according to Sharon Perelman, director of planned giving at the Foundation.
Contrast that to the five new donor-advised funds opened in December 2016 and just 10 during the entirety of 2016.
Donor-advised funds allow donors to contribute assets to a fund, from which they can direct distributions to specific charities later.
The rush to open these funds in December was to take advantage of itemized deductions before the law changed, Perelman said.
“Seventy percent of people who used to benefit from charitable deductions won’t be able to in 2018,” she said. “But there is still good reason to set up [donor-advised funds] now. As long as you will exceed $24,000 in itemized deductions and still have reason to itemize, you can dump money into these funds in big chunks and then have it paid out over time. With a donor-advised fund, you get the deduction as soon as you contribute to it.”
Those who put money in a donor-advised fund before the changes in the tax law went into action made a good move, said Jim Lange, a registered financial advisor and president of the Lange Financial Group in Squirrel Hill.
“I was encouraging my clients to do that,” said Lange. “That made a lot of sense, although the changes were announced right before the end of the year, so we didn’t have a lot of notice.”
Because of the doubling of the standard deduction, “I was advising people to do their 2018 donations in 2017,” he said.
In addition to the standard deduction doubling, the other major impact of the new tax laws on a typical donor is a lower tax rate, so one would not be saving as much in 2018 as he would if he took the charitable deductions in 2017, Lange explained.
Seventy percent of people who used to benefit from charitable deductions won’t be able to in 2018.
Another strategy that many taxpayers employed at the end of 2017, and that Lange recommended, was to prepay 2018 congregational membership dues.
Such was the case for several members of Beth El Congregation of the South Hills, who prepaid their 2018 dues last month. Others “made future donations for appeals,” according to Steve Hecht, executive director of Beth El.
The number of congregants getting their donations in before the new law went into effect “was noticeable,” Hecht said. “People were thinking about the changes in the tax law and trying to pre-plan.”
Although many of Beth El’s members will not be itemizing their charitable deductions next year, Hecht said he is not concerned that contributions will decline in 2018.
“When you have a synagogue, the synagogue is the membership, and the membership is committed to the mission,” he said. “The contributions will remain intact.”
Likewise, Congregation Beth Shalom saw “a significant increase in donations in December,” as well as many pledge commitments being paid off, according to Rob Menes, executive director of Beth Shalom.
Like Hecht, Menes said he is “not worried” that donations will go down in 2018 because of the tax law, but if they do, “we would look at other ways of funding.”
“We’re all part of the community,” he continued. “The donors are us. We will make it work.”
Yeshiva Schools of Pittsburgh also experienced an increase in donations at the end of December, according to Chezky Rosenfeld, director of development for Yeshiva.
Rosenfeld did get in touch with some of Yeshiva’s donors, he said, to suggest end of year giving in light of the changes in the tax code.
“There were people I spoke to about it,” he said. “I mentioned setting up donor-advised funds at the Federation’s [Jewish Community] Foundation to give the gift now and then distribute the funds later. A lot of people were looking into that.”
Although there are many options of places to set up donor-advised funds, such as the Pittsburgh Foundation, Vanguard, or Fidelity, the Jewish community benefits from funds established at the Jewish Community Foundation because “the fee revenue supports the Jewish community,” said Perelman. PJC
Toby Tabachnick can be reached at