Modern Income Taxes and the Charitable Deduction

Americans made charitable gifts of bequests, trusts, annuities, and complex assets long before taxes played a role in their planning. For 300 years after the colonies at Jamestown and Plymouth began, charitable gift planning was not driven by tax considerations. Our modern federal income tax system was enacted in 1913; the estate tax in 1916; and a tax deduction for gifts to qualified charities was first introduced in 1917.

Tax policy is often intended to influence behavior, including the ways Americans make gifts to charity. Today’s donors and professional advisors are properly concerned with the implications of ever-changing income, gift, and estate tax laws.  Since the modern tax system was enacted, “Few, if any, significant gifts are made without a consideration of their tax consequences,” notes The Harvard Manual on Tax Aspects of Charitable Giving.

 There is considerable interest in analyzing the impact that the Tax Cuts and Jobs Act (TCJA) enacted in 2017 is having on charitable giving. Millions of Americans who previously enjoyed a tax deduction by itemizing their gifts have lost that benefit by taking the higher standard deduction.

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