When President Trump signed the Tax Cuts and Jobs Act of 2017 into law this past December, ministers and other church leaders wondered about the new law's implications for ministry in 2018 and beyond. To help churches better understand key aspects of the law and its possible effects on ministry, Richard Hammar, senior editor of Church Law & Tax Report, quickly released an analysis—available without additional costs to purchasers of the 2018 Church & Clergy Tax Guide (CLTStore.com/TaxUpdate). He also gave an informative webinar titled "Tax Reform and Tax Law Changes: What Church Leaders Should Know for 2018." (available in the media section of ChurchLawAndTax.Com).
For this issue of Church Law & Tax Report, we combined portions of Hammar's analysis with insights drawn from interviews with Frank Sommerville, an attorney, CPA, and editorial advisor, and Ted Batson, an attorney and CPA with the accounting firm CapinCrouse—all with the goal of giving leaders a better understanding of what the reform does—and doesn't—mean for churches and their employees.
Issue No. 1: Will charitable contributions suffer?
"The Tax Cuts and Jobs Act retains a deduction for charitable contributions, but the deduction will be available to a smaller number of donors because of a substantial increase in the standard deduction," said Hammar. "The significantly increased standard deduction will reduce the number of persons who are able to itemize deductions on Schedule A (Form 1040) from 30 percent to as few as 5 percent of all taxpayers. The result will be a significant decrease in the number of taxpayers who can claim a tax deduction for contributions they make to churches and other charities" (see Table 1).