RENO, Nev. — After years of steady growth, total charitable giving dipped by 1.7 percent in 2018, according to a report by Giving USA.
This came on the heels of the enactment of President Trump's 2017 Tax Cuts and Jobs Act, which doubled the standard deduction for taxpayers — jumping to $12,000 for singles and $24,000 for married couples.
In other words, the new tax law reduced the benefits of charitable giving for many would-be donors. In fact, last year saw the first drop in individual giving since 2013.
However, while individual donations dropped, corporate giving rose by 5.4 percent to $20 billion, according to Giving USA.
“In the corporate world, nothing really changed,” said Stevie Casteel, a Reno-based attorney for Snell & Wilmer. “And, this is just my opinion, but I think maybe it's because for corporations, their giving is less tax-motivated and more for the public feel-good and being part of the community.”
Tim Nelson, president of Evans, Nelson & Company CPAs, has noticed this trend, as well. He pointed out that a lot of times large corporations will pair their charitable giving with publicity or advertising.
“So that way they not only benefit from the charitable giving, but they also get the promotion or advertising weight,” he said.
Generally, C corporations' deductions for charitable contributions are limited to 10 percent of their taxable income for the year, Nelson said. He added that if a company exceeds that 10 percent, those charitable donations can be carried forward up to five succeeding tax years, with each of those years being subject to the 10 percent limitation.
“Let's say my corporation, through the rest of the year, looks like it's going to net $100,000 of taxable income,” Nelson said as an example. “The 10 percent charitable limitation would say I can only get a tax benefit on $10,000. I can certainly give more, but if I give more than 10,000 bucks, then all I'm doing is eating away the charitable giving for those future years.”
To that end, Nelson said that the most commons mistakes companies make when it comes to corporate giving is “not knowing where they are” in terms of taxable income and giving for the year.
“If they're not up to date on their books, they might miss out on income tax deductions that otherwise might be available to them,” he said. “If I've only given $2,000 and I wait until January 2nd of 2020 to get it to $10,000, now I've missed out on a $8,000 deduction that I've could've taken in 2019.”
Further, companies need to ensure that their donation dollars are going to a qualified charity. Casteel said the companies can check if a nonprofit qualifies by searching guidestar.org or visiting the IRS website.
A common misconception, Nelson said, is that political contributions are deductible.
“Some people will still ask me about political contributions,” Nelson said. “If the giving is designed around lobbying activities or influencing legislation or supporting a particular candidate, that's all defined as political contributions … and not deductible at all.”
In addition, Casteel said corporations are not able to get a charitable deduction if it gives to an individual in need. But, she said, corporations can set up grant programs that benefit a class of charitable individuals.
For S corporations, options are more limited for donating to charity since they are pass-through entities that are not subject to federal tax income, Casteel said. Instead, shareholders report their S corp income on their personal tax returns. Meaning, unlike C corporations, S corps can't donate to charity and claim it as a business expense.
“S corps need to think about that if they were giving and expecting that their charitable donations are going to be fully deductible by their shareholders,” Casteel said.
-->RENO, Nev. — After years of steady growth, total charitable giving dipped by 1.7 percent in 2018, according to a report by Giving USA.
This came on the heels of the enactment of President Trump's 2017 Tax Cuts and Jobs Act, which doubled the standard deduction for taxpayers — jumping to $12,000 for singles and $24,000 for married couples.
In other words, the new tax law reduced the benefits of charitable giving for many would-be donors. In fact, last year saw the first drop in individual giving since 2013.
However, while individual donations dropped, corporate giving rose by 5.4 percent to $20 billion, according to Giving USA.
“In the corporate world, nothing really changed,” said Stevie Casteel, a Reno-based attorney for Snell & Wilmer. “And, this is just my opinion, but I think maybe it's because for corporations, their giving is less tax-motivated and more for the public feel-good and being part of the community.”
Tim Nelson, president of Evans, Nelson & Company CPAs, has noticed this trend, as well. He pointed out that a lot of times large corporations will pair their charitable giving with publicity or advertising.
“So that way they not only benefit from the charitable giving, but they also get the promotion or advertising weight,” he said.
Generally, C corporations' deductions for charitable contributions are limited to 10 percent of their taxable income for the year, Nelson said. He added that if a company exceeds that 10 percent, those charitable donations can be carried forward up to five succeeding tax years, with each of those years being subject to the 10 percent limitation.
“Let's say my corporation, through the rest of the year, looks like it's going to net $100,000 of taxable income,” Nelson said as an example. “The 10 percent charitable limitation would say I can only get a tax benefit on $10,000. I can certainly give more, but if I give more than 10,000 bucks, then all I'm doing is eating away the charitable giving for those future years.”
To that end, Nelson said that the most commons mistakes companies make when it comes to corporate giving is “not knowing where they are” in terms of taxable income and giving for the year.
“If they're not up to date on their books, they might miss out on income tax deductions that otherwise might be available to them,” he said. “If I've only given $2,000 and I wait until January 2nd of 2020 to get it to $10,000, now I've missed out on a $8,000 deduction that I've could've taken in 2019.”
Further, companies need to ensure that their donation dollars are going to a qualified charity. Casteel said the companies can check if a nonprofit qualifies by searching guidestar.org or visiting the IRS website.
A common misconception, Nelson said, is that political contributions are deductible.
“Some people will still ask me about political contributions,” Nelson said. “If the giving is designed around lobbying activities or influencing legislation or supporting a particular candidate, that's all defined as political contributions … and not deductible at all.”
In addition, Casteel said corporations are not able to get a charitable deduction if it gives to an individual in need. But, she said, corporations can set up grant programs that benefit a class of charitable individuals.
For S corporations, options are more limited for donating to charity since they are pass-through entities that are not subject to federal tax income, Casteel said. Instead, shareholders report their S corp income on their personal tax returns. Meaning, unlike C corporations, S corps can't donate to charity and claim it as a business expense.
“S corps need to think about that if they were giving and expecting that their charitable donations are going to be fully deductible by their shareholders,” Casteel said.
