There May Still Be a Way to Obtain Tax Benefits for Your Charitable Donation.
One of the results of the Tax Cut and Jobs Act is that the vast majority of Americans will no longer be itemizing deductions on their tax returns. The standard deduction is now higher than the sum of most taxpayers deductible expenses - so there is simply no need to itemize. That means that for those who make sizable charitable donations, there will no longer be a tax benefit.
But there are a couple of ways to still get some benefit - and for a lucky few - to retain the deductability of your donation. But it may take a little work.
Donate appreciated stock.
If you make charitable donations and also have a taxable investment account with significant gains, you need to ask your charity if they can accept donations of stock. For those who can still itemize, you get a full charitable deduction. But whether you itemize or not, you will not have to pay tax on the capital gain in that stock. Assuming that you would have to sell it eventually anyway - that represents an opportunity for significant tax savings.
If You are Over 70 Year Old - Don't Write a Check to Your Charity!
For those who take Required Minimum Distributions from a retirement account, it makes more sense than ever to make your charitable donation directly from your IRA. The donation satisfies your RMD requirement, but is NOT included in your taxable income for the year. You don't really take a deduction for the amount - but since you don't report the income, the effect is the same - you don't pay tax on the money you send to your charity.
Aggregate Donations into a Single Year.
If you are able to swing it financially, consider making two or more years worth of donations in a single year. Doing so may put you over the standard deduction amount, thus allowing you to benefit from tax deductibility. If you know you want to make donations, but not sure who will be the beneficiary of your largesse, consider setting up a donor advised fund. You can make the donation and take the deduction, then distribute the funds to a 501c charity of your choice later on. Of course, gifts are irrevocable, so you need to be certain you can part with the money.
If you still need to make a charitable donation for 2018, or are starting to plan for next years donations, give us a call and see if any of these tax ideas may work for you.