Charitable Donations 2018: Implications of the New Tax Law

Since the new tax law nearly doubled the standard deduction, approximately 85 to 90 percent of Americans will not be entitled to deduct their contributions, says Senior CFP Board Ambassador Jill Schlesinger, CFP®

The combination of the rising stock market, strong economy and change in the tax code resulted in charitable donations by American individuals, bequests, foundations and corporations reaching just over $410 billion in 2017. But, because the new tax law significantly increased the standard deduction, non-profits are now nervous that donations may edge lower this year, says Senior CFP Board Ambassador Jill Schlesinger, CFP®. 

“Under the new tax law, approximately 85 to 90 percent of Americans will not be entitled to deduct their contributions,” says Schlesinger. “But many give for altruistic reasons, not just for tax write-offs, which is why I am hopeful that the giving trends continue. There are also strategies consumers can deploy to make sure they’re getting the most from their charitable donations.” 

Schlesinger shares tips to navigate end of year contributions amid the changes in the tax law:

• Bundle Contributions: One benefit of the change in the tax law, as it pertains to charitable donations, is the opportunity to review how you want to incorporate your donations into your overall financial plan. It may be smart to “bunch” future years’ charitable contributions in order to qualify for deductions.
• Gift Appreciated Securities: Making a gift of appreciated securities from a taxable investment account allows you to write off the current market value (not just what you paid) and escape taxes on the accumulated gains.
• Make Any Payments Before 12/31: If you are planning to send a check, your payments must be postmarked by midnight December 31^st – just writing “December 31st” on the check does not automatically qualify you for a deduction; and pledges aren’t deductible until paid. Donations made with a credit card are deductible as of the date the account is charged.
• Consider a QCD: For those who are 70 ½ and older and need to withdraw money from an Individual Retirement Account (IRA), a Qualified Charitable Distribution (QCD) allows you to direct your Required Minimum Distribution (RMD) to a public charity. QCDs don’t qualify as an itemized charitable deduction, but you’re not taxed on the money and are able to minimize your Adjusted Gross Income (AGI) as well as a number of benefits like Medicare premiums. 

Read Schlesinger’s full blog post here with more details.

For more guidance on charitable contributions, talk to a CERTIFIED FINANCIAL PLANNER™ professional today or visit www.letsmakeaplan.org