By Lauren Klein via Iris.xyz
Before TCJA (the new tax law), charitable deductions were a pretty easy piece of the financial puzzle. You chose your charity, donated a certain amount, and deducted that amount from your taxable income. Sure, giving pre-tax dollars was better, but even if you simply wrote a check to your charity of choice, you got a tax deduction. Oh, how times have changed! And those changes have me worried not only about the much-needed cash flow to charities, but also about the impact on our clients—especially those who give $1,000 or more over the course of the year. The good news: careful planning now can save you money on taxes in the coming years, and it can also help ensure your gifts are making a real financial difference to the organizations that rely on your help year after year.
The change that is likely to impact charities most is the increase in the standard deduction. The deduction for married couples filing jointly has nearly doubled, from $13,000 to $24,000. For single taxpayers and those who are married and file separately, the deduction will rise from $6,500 to $12,000. This increase presents a challenge when it comes to charitable giving. Because most taxpayers won’t exceed the standard deduction, they will no longer need to itemize. And without a direct tax benefit, charitable gifts may be much less attractive—at least from a tax perspective.
Luckily, there are strategies to help charitable donors maintain a tax advantage while continuing to support the good work of the organizations they support. Here are three options to consider today:
- “Bunch” your gifts to deduct years of gifts in a single calendar year.
If you have the cash on hand, you can bunch multiple years of gifts into one tax year. If you’re single, your standard deduction is now $12,000. Let’s assume your property taxes are $6,000 and your state income tax is $5,000, equaling $11,000 in deductions. If you then give $1,000 to charity, even though you max out your standard deduction, you receive no tax benefit.
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