College Endowments Could Be Taxed

College Endowments Could Be Taxed article image

In a surprising move, the GOP tax plan includes a hit to one of the places where wealthy people like to contribute in their estate plans: college endowment funds.

Many wealthy people have hopes of leaving a legacy and using their money to do good things. While they donate to all sorts of different charities, many like to give money to their alma maters’ endowment funds.

Over the years, so much has been given to the most prestigious schools in the nation, that those schools have been criticized for charging high tuition when they have millions of dollars in their endowments.

Interestingly, the GOP’s tax plan would include new taxes on those endowments, as CNBC reports in “Wall Street college stars are surprise tax reform targets.”

Under the proposal, university endowments would face a 1.4% tax on investment income. If the endowments have executives who are compensated more than $1 million a year, they would face a 20% excise tax.

Several wealthy endowments currently pay multiple executives more than $1 million a year.

If this proposal passes, it could mean that wealthy donors will want to give to their alma maters in different ways. In addition, money given to the endowment funds will not go as far as it does now.

This proposal should be monitored for now.

After passage, if you want to change how you donate to a university, then visit your estate planning attorney.

Reference: CNBC (Nov. 3, 2017) “Wall Street college stars are surprise tax reform targets.”