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Tax Law and Charitable Giving


The Tax Cuts and Jobs Act signed into law on December 22, 2017 will impact charitable giving in the future.  Here is a summary of some of the changes and potential giving strategies that you can use to continue funding charities close to your heart.

First and foremost, the law significantly increased the standard deduction for individuals and couples, which means fewer people are going to itemize and thereby receive no tax benefit from a charitable contribution.

One possible strategy towards being able to itemize is to pay two years’ worth of contributions in one year.  This makes sense if you make regular contributions to a charity – if you can “prepay” for this year and the following year, the increased amount could get over the standard deduction threshold.  Per new tax law you can deduct up to 60% of your income as a charitable contribution.

Another strategy still allowed for people over age 70 ½ involves Required Minimum Distributions (RMDs) from a Traditional IRA.  An IRA owner who must take an RMD can avoid claiming it as income on their taxes by directly transferring the RMD amount to a Qualified Non-Profit Organization.  Because they don’t have to claim the income, they don’t have to worry about itemizing this amount as a deduction.

Other strategies include the following:

  • Employer matched charitable contributions
  • Direct contributions of farm products
  • Donor Advised Fund (DAF) (great for highly appreciated assets)
  • Funding a permanent life insurance policy

Follow the blog for more info on these other gifting strategies.