CRYSTAL LAKE – Some nonprofits in McHenry County are concerned their donation coffers could take a hit this year because of a federal tax overhaul that will give Americans less incentive to give to charitable causes.
“Whenever there’s changes like this, there is cause for concern,” said Anne Boccignone, vice president of communication and development at Rosecrance McHenry County, a nonprofit offering mental health and substance abuse treatment. “At this point, we haven’t changed anything, but we’ll see how it rolls out.”
Starting this year, the millions of relatively small donations from people with moderate incomes to mainstream charities could be sharply reduced, charity executives and experts said. That means charity could become less of a middle-class enterprise and a more exclusive domain of the wealthy, who tend to give to arts and cultural institutions, research facilities and universities. Their use of the charitable tax deduction is less likely to be affected by the new law.
The sweeping Republican tax overhaul, delivered by the GOP-dominated Congress and signed into law by President Donald Trump, doesn’t eliminate or even reduce the deduction for donations to charitable, religious and other nonprofit organizations. Charitable giving should be encouraged with a tax incentive, congressional Republicans crafting the plan said early on, and the cherished deduction – although costing about $41.5 billion a year in lost federal revenue – wasn’t struck, even as other longstanding deductions fell or were scaled back.
A central pillar of the massive tax law doubles the standard deduction used by two-thirds of Americans, to $12,000 for individuals and $24,000 for married couples. That means many taxpayers who now itemize deductions will find it’s no longer beneficial for them to do so. They’ll find that the deductions they normally take, including for charitable giving, don’t add up to as much as the new standard amount.
Some estimates project that as few as 10 percent of taxpayers will continue to itemize deductions on their returns, down from the current one-third. By contrast, the wealthiest Americans likely will continue to receive the tax benefit of using itemized deductions, including for charitable giving.
Especially for people who currently itemize and donate small to moderate amounts to charities, the tax incentive to give diminishes. And with the new law kicking in Monday, they might have chosen to max out their donations before the end of 2017, rolling this year’s giving back into last year.
McHenry County nonprofits hope donors will continue to give, even without a tax incentive to motivate them.
“Hopefully, people give because they believe in our mission and they want to help the people we serve,” Boccignone said of Rosecrance donors.
The nonprofit has a $50 million budget, and $2 million of those funds come from donations.
“There are a lot of reasons people give, and tax incentives are one piece of it,” Boccignone said.
CASA of McHenry County depends on donations.
A majority of the Crystal Lake nonprofit’s $400,000 budget – about 97 percent – comes from donations, development manager Kari Siegmeier said.
The nonprofit appoints advocates to children placed into temporary foster care, often as the result of abuse or neglect. They follow the child or children as they move through the legal process, with the end hope being a permanent situation, long-term foster care, adoption by a family member or adoption by a new family.
It is Siegmeier’s hope that donors give money to support the nonprofit’s cause rather than their tax benefits.
“So many of our community members are heart-based and are going to continue to give,” she said.
In years when donations are down, the nonprofit preserves a positive attitude and tries to find new investors to fill the gaps in their budget.
“We’re always looking at our funding plan,” Siegmeier said. “We’re always looking for new investors.”
• The Associated Press contributed to this report.