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How to Optimize Charitable Giving with 2018 Law Changes

(posted: November 25th, 2018)

Young people sorting through charitable donations

Tuesday, November 27, is #GivingTuesday, a fairly new concept in the U.S. that follows Thanksgiving and Black Friday with a coordinated day of donating to charities.

However, charities are expected to receive fewer donations this year as a result of the new Tax Cuts & Jobs Act that, among other things, eliminated or sharply reduced the tax benefits of charitable giving for many Americans.

Since the standard deduction claimed by individuals or couples has nearly doubled, fewer people will itemize their deductions and you must itemize in order to deduct charitable contributions from your taxes.

In light of these changes, the National Association of Enrolled Agents offers the following tax tips to help taxpayers maximize the impact of charitable contributions while complying with the new tax laws.

  • Bundle Your Donations
    One way to surpass the new standard deduction of $12,000 for single filers and $24,000 for couples is to save money over time and donate every two or three years instead of every year. One popular way to do this is by donating to a Donor-Advised Fund (DAF). Contributing to a DAF qualifies you to receive tax benefits now, enables your donation to grow tax free, and gives you the ability to decide later how you wish to make grants from that fund to qualified charities.
  • Retirees: Make a QCD from Your IRA
    Taxpayers aged 70.5 years or older may make a qualified charitable distribution (QCD) from their IRA directly to a charity in lieu of taking a required minimum distribution (RMD) from that IRA each year. We've talked about this before, here.
  • If You're Feeling Especially Generous
    The limit on charitable deductions has increased from 50 percent to 60 percent of your adjusted gross income. While donating more than half of your income to charity may not be a practical option for most, charities will certainly appreciate those wealthy or generous enough to donate at such levels. Similarly, your college or university will appreciate your purchase of season tickets so you can entertain clients at campus sporting events. However, the cost of those tickets no longer qualifies as a business entertainment expense.
  • Don't Forget the Basics
    Make sure the organizations to which you donate are tax-exempt. One way to be certain is by using the tax exempt organization search tool available on the IRS website. You may also confirm an organization's status by calling the IRS at 1-877-829-5500, but using their online tool is generally faster.

  • Charity Navigatoris another resource for learning about the financial health, accountability, and financial transparency of a given charity. Charity Navigator provides independent evaluations of more than 9,000 charitable organizations. They also provide lists of specific charities working to provide aid to those impacted by natural disasters.

We can help you make the most of your charitable donations in light of the new tax laws. Please contact us to discuss your options.

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