Donation Strategies for Charitable Giving and Tax Savings
The 2017 tax law brought substantial changes that can affect charitable giving, so make sure you understand how it may impact your donation decisions. The Tax Cuts and Jobs Act of 2017 might have you asking whether you should modify your plans for giving to the causes you support. Read on to learn what to consider when re-evaluating your donation strategies.
Many will no longer itemize deductions. The new law doubled the standard deduction, which now stands at $24,400 for couples and $12,200 for single filers. A cap on state and local tax deductions and the elimination of many deductions all favor use of the standard deduction. Charitable deductions require itemization, which means your giving strategies might need to be revised.
Consider doubling your giving on alternate years. One strategy to consider is to bunch two years of giving in one year and then delay giving again until year three. By bunching two years’ donations, your itemized deductions might exceed the standard deduction, allowing you to deduct donations and receive the tax benefit. Besides cash, you can donate appreciated stock you’ve held for a year or longer. This will save you the capital gains tax on the appreciated amount while allowing you to deduct the stock’s full market value.
A donor-advised fund (DAF) facilitates concentrated giving. You can establish a DAF and fund it with a single large donation that you itemize and deduct in the first year. Your contribution can include cash, appreciated stock, and other assets. You then distribute the fund over the next several years to the charities you choose. Furthermore, the earnings from invested DAF contributions are tax-free, which might boost the amount of future donations from the fund.
Learn about charitable gift annuities (CGAs) and charitable remainder trusts (CRTs). The irrevocable donations to either are deductible if you itemize. A CGA is an annuity contract between you and a charitable organization. The annuity generates a lifetime stream of income. The income you receive might include a tax-free return of principal. Upon your death, the CGA assets are distributed to the charity. CRTs are irrevocable trusts that pay income to beneficiaries for a specified period, after which the remainder goes to the designated charities.
Charitable donations can still play significant role in your tax, retirement, and estate planning. The right strategies can earn you tax benefits and might provide partially tax-free annuity income while reducing your taxable estate. Call or email me to set up a comprehensive giving strategy that provides benefits to your favored charities as well as to your own wealth accumulation and preservation plans.
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This material was prepared for Diane Hinckley and does not necessarily represent the views of the presenting party or their affiliates. This information has been derived from sources believed to be accurate. Please note-investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
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