Gentrification of Philanthropy

In general, “gentrification” happens when older more affluent people move into a neighborhood previously occupied by younger less affluent people.  That same change in the neighborhood is happening in charitable giving as a result of recent changes in the tax law.  The current transition to older more affluent donors away from younger less affluent donors is the gentrification of philanthropy.

Gentrification of Philanthropy

The Tax Cuts and Jobs Act of 2017 modified the tax benefits from charitable donations.  Under the new law, charitable donations are still deductible, but only if you itemize.  However, the personal exemption was raised.  In 2019 the personal deduction was $12,200 for individuals and $24,400 for married couples filing jointly.  The Joint Committee on Taxation estimated that this would reduce the number of households that itemize from 46.5 million to just over 18 million.  This reduces the number of households that will itemize deductions by approximately 61%.  While this may make tax reporting simpler, it also has the result of making the charitable deduction unavailable for all those households that no longer itemize deductions.

The American Enterprise Institute estimated that in 2018 alone, this would result in a loss of $17.2 billion in charitable contributions.  As it turns out, the loss was only 15.8 billion.  Is it good or bad public policy that charitable contributions were “only” reduced by 15.8 billion instead of the expected $17.2 billion?

Fighting The Fires of Gentrification

The gargoyles that stood over the walls of Notre Dame for centuries could not deter the flames that gutted the ancient edifice.  What was once a mighty and long standing historical marker was reduced to smoldering rubble in a few short hours.

Likewise, charitable giving has been the foundation of social justice from before the founding of our nation.  And yet, even well intended policy changes can quickly devastate the capacity of righting social wrongs through voluntary contributions.

A powerful tool that can enable tax payers to re-claim their ability to deduct charitable contributions is the Family Foundation established as a Donor Advised Fund with such organizations as Legacy Global Charities.

The Charitably Integrated Estate Plan

Including charitable giving in the plan is essential to maintaining a healthy relationship with wealth over multiple generations.  Charity begins at home.  The effects of such giving are felt in homes for generations to come.  Find out more.