The Tax Cuts and Jobs Act will apply to taxpayers starting in 2018. With the increase in standard deduction and estate tax exemption, many of our typical tax strategies are evolving. According to the Tax Policy Center’s latest estimate, this tax legislation could reduce charitable giving up to $20 billion just in 2018. The following are a few suggestions to continue contributing to your favorite charity while still maximizing your tax benefit under the new law.
Give More – No, Seriously
Starting next year, donors should consider giving twice as much to charities in one year, even if that means giving nothing the following year. Giving more in a single year will make it worth itemizing your deductions that year and give you the most long-term tax savings. Furthermore, the tax law increases the maximum taxpayers can donate to charities in cash, raising the limit to 60% of adjusted gross income from the current 50%.
So how can someone gain the tax benefit of “bunching” several years’ worth of charitable gifts into one year, but not affect the charity who relies on constant, annual giving? Enter the donor advised fund…
Donor Advised Funds
Taxpayers can add assets such as cash or stocks to a donor advised fund whenever they want (this is where you get your deduction), then decide later exactly which charities will receive the money and when they will receive it. Donor Advised Funds are also a good way to unload appreciated securities without paying capital-gains taxes while also getting to deduct the full current value of those securities from taxable income that year.Click For Sound
Qualified Charitable Distributions
This isn’t new, but the benefit was unaffected by the tax law and it’s still a great option for seniors to avoid taxable income from their required minimum distributions. The QCD allows people aged 70½ and older to rollover up to $100,000 from retirement accounts to the charity of their choice. The money is subtracted from taxable income, which alleviates some tax burden.