Charitable Giving Using IBC


by L. Carlos Lara

Just when you think that you have learned all of the possible strategies associated with Nelson Nash’s Infinite Banking Concept (IBC), up pops a brand new one. New, that is, but only to all those who have never realized the various opportunities found in practicing IBC as your very own banking system, especially at tax time. But now the latest window of unrecognized opportunity for IBC has surfaced in the area of charitable giving. According to recent publications charitable dollars have dropped significantly under the new tax law. In this article I explore some of the reasons attributed to this phenomenon despite the news about our strong economy.

This dramatic change revealed itself to me as I was preparing my end of the year 2018 personal and corporate tax returns. And, just so you are fully aware and can follow my complete story line once I fully get into it, I am one of those individuals who always files an extension. I do this, not because my returns are all that complicated, but mostly because I have so many different filings due to the nature of my corporate trust business.

But I also do it because I practice IBC.  This year, however, those extensions proved to take a different turn than in years past, all on account of a brand-new incident.

For one thing, last year (2018) I made an unusual charitable contribution to my church congregation and reported the amount to my accountant. In this way he will be prepared for filing my returns late this year (2019) which, incidentally, I just made. Because I was filing so late I was naturally in a hurry to send off my returns to “uncle Sam,” but the numbers in my returns stopped me in my tracks. I can only imagine how many taxpayers who filed even earlier than I did may have experienced a similar jolt with their own 2018 returns. The culprit, as you may have already guessed, was President Donald Trump’s Tax reform and the new standard deductions. They were huge!

Now, it’s recently come to light, as it will once again for the 2019 tax returns this coming March, 2020, that these new higher standard deductions have taken many taxpayers by complete surprise. Charities, especially, those that traditionally rely on donations from taxpayers who aren’t necessarily wealthy have been equally astounded by what’s happening to their donations.

In fact, a recent CNBC 2018 article named a congressional report citing that 18 million households will itemize deductions this year, down from 46.5 million last year.1 That’s a significant drop in itemized deductions! Keep in mind that without itemized deductions most individuals will lose all tax benefits associated with items such as mortgage interest, state and local taxes, medical and dental expenses, and most especially— charitable giving. The Internal Revenue Service (IRS) claims that “this is a difference of 21,452,204 taxpayers claiming nearly $57.3 billion less in donations.”2

Here is the reason there’s been such a huge difference. The standard deduction for 2018 is nearly double the level for 2017, rising from $6,340 to $12,000 for single filers and from $12,700 to $24,000 for couples filing jointly. For 2019, it rises to $12,200 for singles and $24,400 for couples. Additionally, the new standard deductions will remain at their current levels until 2025 which means that the number of taxpayers who will itemize their deductions is not likely to change.

For sure, the law cut individual taxes, but it also dramatically changed the incentives for charitable giving for certain taxpayers in ways that left charities wondering how to replace those lost donations. All of a sudden, a golden opportunity has opened up for Authorized IBC Practitioners and their clients to offer IBC to their churches, church members and all other types of charities as a way to reverse the current trend. Keep in mind that IBC is still one of the best kept secrets and many households and businesses owners know very little about it.

How Do Tax Brackets Impact My Deductions?

Each taxpayer is more or less in several income tax brackets, but the term “tax bracket” refers to your top tax rate. Also known as your marginal tax rate, meaning the percentage of tax applied to your income for each tax bracket in which you qualify. As an example, a portion of your income is taxed at 12%, the next portion is taxed at 24%, the next portion at 35%, and so on. So, as you can see, it’s a tiered system and every taxpayer has his own threshold.

As has already been made clear, the 2018 tax brackets changed significantly. Each taxpayer noticed the change whether they filed as a Single Taxpayer, Married Filing Jointly, Married Filing Separately, or as a Head of Household. For example, for those filing as Married Filing Jointly, the tax rates added up to the following:

10% Up to $19,030
12% $19,050 — $77,400
25% $77,400 — $165,000
24% $165,000 — $315,000
32% $315,000 — $400,000
35% $400,000 — $600,000
37% $600,000 — or More

The irony of lower tax rates as we see here or as we witnessed during the Ronald Reagan presidency in 1986, is that they make deductions less valuable. Remember that deductions are not “dollar-for-dollar” subtractions (like tax credits are) from your total tax bill. This is a significant item that many taxpayers completely forgot when President Trump’s new law took effect.

The standard deduction is the amount filers can subtract from income if they don’t list as “itemized” write-offs on Schedule A. As a result, a filer’s itemized deductions for 2018 will need to be greater than the new standard deduction amounts for the filer to benefit from itemizing.

For example, say that a couple donates $10,000 to charities each year, but their mortgage is paid off and their only other itemized deduction is $10,000 of state and local taxes, for a total of $20,000. In this case the couple will opt for the standard deduction of $24,000 because it exceeds the $20,000 total on Schedule A. In essence this couple won’t get a specific tax benefit for giving to charity on their 2018 return.

Tricky Tax Concept

As you can see, itemized deductions are a somewhat tricky tax concept when you think about it. It was Congressman Donald Pease from Ohio who realized that you get to deduct certain expenses you’ve paid all year when you itemize, many of them quite necessary, such as mortgage interest, state and local property taxes, and charitable contributions. Of course, the more you earn, the more you can spend on these things, so wealthier taxpayers were getting some pretty significant deductions.

The Pease Limitation, (named after Congressman Donald Pease), was an overall reduction on itemized deductions for higher-income taxpayers that had been in effect for most of the years between 1991 and 2017. The rule reduced the value of a taxpayer’s itemized deductions by 3% of adjusted gross income (AGI) over a certain threshold. The 3% reduction continued until it phased out 80% of the value of the taxpayer’s itemized deductions. The Pease Limitation was eliminated as part of the recent tax reform package.

For non-wealthy charitable donors who want a tax break, there are ways within the new tax structure, although they have their limitations. One of the more popular is to “bunch” donations every few years to surmount the higher standard deduction thresholds. For example, suppose a couple originally donated $10,000 every year to a charity. In the new environment, they could donate $20,000 every other year to the charity, taking the standard deduction in the off-years, and (assuming they had enough other deductions) probably surpassing the now standard $24,000 deduction on the years when they made the large donation. Just be sure to always remember that these are not dollar-for-dollar tax reductions, a realization that may people forget or simply confuse.

Givers who are not wealthy can also consider donor-advisor funds which can enable donors to bunch smaller gifts into one large amount and take a deduction in the year of the gift. The donor can then designate charities with advisor privileges over how their account is invested later. Meanwhile, the assets can be invested and grow tax-free. Just keep in mind that this strategy has significant fees associated with it. They are charitable investment accounts where you can deposit cash, securities or other financial instruments, but you do have to surrender ownership of anything placed in the fund.

Givers who are 70½ or older have another option if they have individual retirement ac counts (IRAs). These are tax qualified plans like a 401(k) or a 403(b) and the like. Just contact your IRA trustee and ask them to make the charitable gift directly to an IRS- approved charity. It’s really as simple as that. Except make sure you understand that you will first have to pay the tax because your qualified plan has only been deferred. Now you would be pulling out the investment and the tax would be due.

There are a few other tricks like avoiding the capital gains tax on investments by giving stocks or other appreciated assets. Artwork and antiques have increased in value recently so don’t overlook those. Even the very wealthy give noncash donations specifically because of the tax advantages. Although charity is simply a matter of goodwill and generosity, the present environment demonstrates that givers need an incentive to give and it needs to be a tax break.

But I will say right here and now that by far the best viable option for charitable giving, whether you are a wealthy taxpayer or not, is Nelson Nash’s Infinite Banking Concept (IBC). I have been practicing this strategy for years and so have many of you. You simply borrow the money for your charitable gift directly from your life insurance policy. It’s easy, fast and best of all, tax-free. But keep in mind that IBC is not an investment, nor is it a function of the IRS code, it’s life insurance. All important points you have heard Bob and me talk about before in our books, the Lara-Murphy Report, and our podcasts.

But my main message in this article is that IBC was instrumental in allowing me to give generously (especially) at a time when churches were losing donations from millions of taxpayers. This is why I have become convinced that IBC can help anybody give to any charities advantageously, not just churches. The timing could not be any better than now to help millions of taxpayers understand the merits of IBC and what it is capable of providing in the area of charitable giving.

Tithers Only Make Up 10-25 Percent of Any Congregation

When I became a Christian in 1976 I joined a church congregation that did not believe in tithing.

Tithing, as you know, means that you give 10% of all the money you earn to your church, but that was not the case at this congregation. We were expected to simply give generously as we were able, consequently I gave generously, but never kept up with how much I gave. In 2010 I joined a church congregation that believed in tithing and so I tithed, but once again, never gave it much thought. I simply gave my accountant the numbers and he worked out the details.

In 2014, my wife and I experienced what is known as a “church split.” We left our church along with 20 other couples with the idea that we would start a new church. After 3 years of renting a school house, we are about to complete our church structure valued a $20 million. However, to support this endeavor each member was asked to pledge amounts in excess of their annual tithes. Each annual pledge in addition to our tithes would be paid each year for three consecutive years. All this represented a major contribution for us and all of a sudden, the numbers became much more serious. These expenditures came to light precisely during my 2018 tax year. That’s when I first realized the impact and implications of the new tax law up close and personal.

I remember telling my wife how glad I was that I could rely on my IBC banking policy. We knew we wanted to make these pledges to help our congregation build that church building and IBC had helped us easily make those commitments. We have to believe that others would want the very same opportunity.


Charitable gifts plunged in the first year under the new tax law. The law cut individual taxes, but it also dramatically changed the incentives for charitable giving in ways that left nonprofits wondering what would happen long term.

The main point in this article is that these new tax rules are expected to continue for five years, perhaps longer, and so the problem that charities, especially churches, are experiencing will continue to grow as well. Our chance to introduce IBC to charities in need is actually a ‘win-win’ opportunity for everyone. Authorized IBC Practitioners and their clients should begin the IBC introduction especially to their church members.

The opportunity I have spoken about is tremendous just always keep in mind that to be of real service to our clients, church members and all other charities, always consult with your accountant about all tax matters so that IBC can be better understood by the general public in light of the new tax law. If we really want to grow the 10% there is no greater opportunity to do so than this one right now.

1. What the new tax law means for your charitable giving, CNBC article by Jessica Dickler, May13, 2018 new-tax-law-means-for-your-charitable-giving.html

2. Charitable Donations Deductions Plummet After Tax Reform, Forbes article by Kelly Phillips Erp, August 28, 2019, kellyphillipserb/2019/08/28/charitable-donation-deductions-plummet-after-tax-reform/#2a7c592c5ac5