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The Good News for Charitable Giving

The Good News for Charitable Giving

‘Tis the season when many people are considering their year-end charitable giving. It is our favorite time of year at the Community Foundation because we never cease to be inspired by the generosity in our community. This year many are considering the new landscape laid out by the Tax Cuts and Jobs Act (The Act) signed into law in December of 2017 as they determine how and how much they are going to give this year. 


The Good News for Charitable Giving

‘Tis the season when many people are considering their year-end charitable giving. It is our favorite time of year at the Community Foundation because we never cease to be inspired by the generosity in our community. This year many are considering the new landscape laid out by the Tax Cuts and Jobs Act (The Act) signed into law in December of 2017 as they determine how and how much they are going to give this year. 

Since the passing of The Act we have shared what we believe is the good news for charitable giving. For starters, the reasons people give charitably are many and varied and most often align with a desire to give back and help others. A leading indicator of how much individuals will give is their available discretionary income. That might be the best news of all as the primary motivation for The Act was decreasing the amount of money in the federal government and increasing the amount of money in private citizens hands.   

That means people on balance will have more discretionary income to potentially give to charity. And by using one or more of the tax smart strategies laid out in this article—gifting appreciated assets, bunching donations into one tax year and making qualified charitable distributions from one’s IRA—individuals and companies have the opportunity to give even more this year. 

Let’s take a look at the main points of The Act that are likely to have the largest impact and how this may affect charitable giving. 

What has changed:  

  • The standard deduction increased substantially ($12,000 for a single person and $24,000 for a married couple) and fewer people will need to itemize their taxes. Using the increased standard deduction, most taxpayers will enjoy a deduction that is equal to or greater than the deductions they would be eligible for if they itemized. 
  • The amount of charitable contributions made in cash that can be deducted in any particular year has been increased from 50% of adjusted gross income to 60% of adjusted gross income.
  •  The estate and gift tax exclusion has doubled.

What hasn’t changed:

  • The ability to donate appreciated assets (stocks, bonds or other assets) and avoid capital gains tax.  
  • The ability to gift retirement assets (including qualified charitable distributions from an IRA for those age 70. or over) and life-income gifts (charitable gift annuities and charitable remainder trusts). 
  • The ability to deduct charitable donations has not been capped or eliminated.  
  • Donor Advised Funds are not affected, which means contributions to these funds continue to be deductible. 

The good news:

  • Many taxpayers will have an increase in their take-home income leading to additional discretionary income to consider in their charitable giving. 
  • Donor Advised Funds offer the flexibility for donors to “bunch” or “bundle” donations into one tax year and grant the funds to their favorite charities over multiple years, enabling them to exceed the standard deduction threshold. 
  • Donors 70 and older and required to take minimum distributions for their retirement plan may make a distribution directly from their account to qualified charities, effectively reducing their taxable income. 
  • Donating all types appreciated assets continues to be a tax-smart strategy.  
  • Donors making large and legacy gifts can deduct higher amounts than in previous years. 

The even better news:

The tax benefit is rarely the main reason people support nonprofits in the first place. People give because they want to make a positive difference in the lives of others and in our world. The needs in our community didn’t go away, so your opportunity to care for your neighbor didn’t go away either. And you will likely be able to give just as much to charity as you have in the past and still increase the amount of your income due to the lower tax rates.

 

To learn more about making the most of your charitable giving, contact your professional advisor or tax manager, or you can contact us for further information and resources at info@cfhz.org.




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