Churches across the US are holding their breath to see the impact of the new tax law impact on church giving and their 2018 budgets. Many churches are concerned how the new tax law impact on church giving might reduce their member’s generosity this upcoming year.
Tax Law Impact On Church Giving
The new tax law nearly doubles the standard deduction which is the amount people are allowed to subtract from their taxable income. The amounts – $12,000 for singles (up from $6,350 for 2017) and $24,000 for married couples who file jointly (up from $12,700). For many, this is seen as bad news for churches because people who have donated to charity for the purposes of a tax deduction will be less motivated to give.
Churches fear many people will have less incentive give because it will be less likely that itemized expenses will be greater than the standard deduction. “For many donors, the rise in the standard deduction will provide a larger overall deduction than the taxpayer’s potential itemized deductions (which include charitable giving), so the financial incentive to donate is reduced,” said Paul Hawkinson, treasurer and executive director of finance for the Covenant. “Additionally, higher income taxpayers are also affected by a new cap on the deductibility of local and real estate taxes, which may also make it more difficult to reach a threshold where itemizing makes sense.”
The Scope of Tax Law Impact On Church Giving
A report by Giving USA on charitable giving notes that “62% of religious households give to a charity of any kind, compared with 46% of households with no religious affiliation.”
Giving to churches and para-church organizations amounted to 32% of all charitable giving in 2016 for a total of $122.94 billion. (The next-highest nonprofit sector was education, which received $59.77 billion in 2016.) I hope this gives you a glimpse as to the size of the dollar amount we are discussing in this article.
Tax Law Impact On Church Giving – The Positive
Others are excited about tax law impact on church giving because it increases the maximum taxpayers can donate to churches. The new tax law increases giving in cash, raising the limit to 60% of adjusted gross income from the current 50%.
It’s virtually impossible to know how the new rules regarding charitable donations will directly impact churches and non-profits in 2018 and beyond.The new tax plan nearly doubles the standard deduction for individuals and families. Additionally, the charitable deductions aren’t going away. In fact, Forbes reports that the rules regulating non-profit contributions are remaining largely the same with just a few changes — one of which is actually good for charities. The percentage limit for cash donations by an individual taxpayer to public charities and certain other organizations increases from 50% to 60%.
According to The Indiana University Lilly Family School of Philanthropy Study- “those making less than $100,000 would increase their giving by about 8 percent, and overall charitable giving would grow between $3.7 billion and $12 billion.”
Many believe that giving to one’s church is a spiritual discipline that will not be affected by tax implications. Others believe that generosity if a matter of the heart and that people will give regardless. Frank Henderson, deputy director of the Topeka Rescue Mission, “Our experience is that Topeka is a generous community and they’re giving with their heart,” he said. “We truly believe they’re making those donations because they want to help someone who is less fortunate, rather than getting a tax break.”
Tax Law Impact On Church Giving- The Negative
The vast majority of what you will read on the internet regarding the new tax law impact on church giving is overwhelmingly negative. It is difficult at this stage to see how much of this is politicized and how much is factual.
One practical fear arises out of the concern of individuals being disciplined enough to itemize their annual giving. The new tax law doubles the standard deduction. The fear is that fewer individuals will bother to itemize their deductions. Currently, about 30% of Americans itemize their tax returns. Experts believe that only 5% of individuals will take the time to fill out the long form.
This 30% to 5% drop will have enormous impacts according to The Council on Foundations. They anticipate new tax bill will “result in a decrease of $16-$24 billion in charitable giving every year.
- The House version of the GOP tax bill could cause a reduction in charitable giving of between $12 billion and $20 billion in 2018, according to a new analysis from the Tax Policy Center.
- Evangelical leaders have raised concerns that the current reform bills in the House and Senate would reduce the incentives that compel givers to donate to churches and other nonprofits.
- Faith & Giving Coalition, of which ECFA is a member, in talking points released last week. “It also is a major step toward reversing our nation’s policy favoring and incentivizing charitable giving, which has been working well for over 100 years. This is devastating for our charitable organization and organizations like ours throughout the country.”
- If you make between $50,000 and $100,000 a year, you’ll probably give less to charity under President Donald Trump’s proposed tax plan.
Tax Law Impact On Church Giving My Prediction
Individuals that are committed to tithing will continue to do it regardless of tax structures. Those that have the spiritual discipline to tithe have come to this practice over time and conviction.
Do you believe the large majority of your church members give because they are primarily motivated by a tax deduction? I do not believe this to be the case. I came from a long line of generous tithers and givers. The ones I have spoken to aren’t sweating this new law one bit.
Don’t get me wrong, the deductions are a great benefit but I do not feel these deductions are the primary driver for serious, generous givers. I believe people give from their heart and because they believe in the mission of their church.
Tax Law Impact On Church Giving & 2018
The churches impacted the worse will be the ones that aren’t led intentionally. The Bible teaches so much about giving, stewardship and generosity. The pastors that lead well and teach the scriptures to their congregations will see less of an impact.
- Giving Series- Every year my church begins the new year with a biblical series on giving. Our congregation expects it, is blessed by it and we are excited to receive this teaching.
- Personal Studies- Dave Ramsey, Larry Burkett, and many others have written great books on finances. My sister wrote a book targeting millennials called Millennials and Money. Trust me there are a lot of studies out there.
- Coaching- My wife and I are newlyweds and we have two financial mentors that we seek frequent advice from. It is AWESOME. Learn from others that are further down the road that have made the right decisions or the mistakes!
- Small Groups- Churches should always be offering various classes of finances and what the Bible teaches.
- Grow Your Church- The best way out of any giving issues is to grow the size of your congregation. Spiritual and numerical growth will always grow your budget. If you need help growing your church learn from these incredible churches. They are the fastest growing in the US!
The ball is really in your court in regards to the new tax law impact on church giving. I believe that the new tax law impact on church giving can be approached from a perspective of wait and see or as leaders pastors can create an intentional plan.
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