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Charitable Giving After the Tax Cuts and Jobs Act

By October 1, 2018April 30th, 2021Tax Planning

If you are charitably inclined, you should consider how the “Tax Cuts and Jobs Act” of 2017 might impact your giving.  While tax benefits are probably not the driving force for your charitable gifts, you should understand how the new tax law changes will affect you so you can continue to make gifts to the charities that matter to you.

Because the standard deduction has now increased, the Joint Committee on Taxation estimates that 95% of taxpayers will no longer itemize deductions on their federal income tax returns, which will reduce charitable gifts by an estimated $14 billion annually.  If you plan to take the standard deduction, there are options for you to continue to support your favorite charitable organizations while receiving tax benefits.

  1. Frontload giving.

If you have the means, you might consider making a larger gift to a donor advised fund (DAF) every few years and itemizing your income tax deductions during such years. A DAF is a charitable gifting vehicle allowing donors to contribute assets to a fund administered by a charitable organization.  The donor receives an immediate income tax deduction for the funds contributed to a DAF but may direct smaller contributions over time to a specific charity in line with their past giving history. The new tax law increases the deduction allowed for cash gifts to charity from 50% to 60% of your Adjusted Gross Income.

  1.  Donate highly appreciated assets.

Gifting highly appreciated assets held for more than one year, such as publicly traded stock, to charity will save you from paying capital gains tax.  In addition to avoiding capital gains tax, if you opt to itemize your income tax deductions, you will receive a tax deduction for the full value of the asset.

  1. Use your IRA for charitable giving.

If you are over age 70 1/2, consider diverting your Required Minimum Distributions (RMDs) to one or more charities.  This will reduce your taxable income. You might also consider naming one or more charities as beneficiaries of your individual retirement accounts.  Because charities are exempt from federal income tax, this will allow them to receive the funds from your retirement account tax-free.

You can select from a wide variety of estate and tax planning options available to help you support charities.  Contact an estate and tax planning attorney at Paule, Camazine & Blumenthal, P.C. to discuss how you can continue to make charitable gifts while maximizing tax benefits.


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