With the new 2018 tax plan approved by Congress, donors are asking
“What does it all mean for my charitable giving?”
Can I still claim charitable deductions for 2018 on my income taxes?
Yes. However, the standard deduction —the amount taxpayers can subtract from their adjusted gross income without itemizing deductions — will rise to $12,000 for individuals and $24,000 for married couples. Donors can continue giving under the new tax rules, but due to the increased standard deduction, planning is important. Proper timing of charitable gifts can save taxes.
What role can a donor-advised fund play in my charitable planning?
Although donor-advised funds are not subject to any new rules or reporting requirements, the new law highlights some of their advantages. Donors can “bunch” several years of donations to a donor-advised fund into one year, and take the deduction. The fund will be used to pay the annual gift to charity, even in years when the donor did not itemize deductions. A donor-advised fund is an ideal solution for charities concerned about the new tax law impairing cash flow.
Example: Jack & Jill are married with an income of $250,000. They have mortgage interest of $11,000 and pay real estate taxes of $18,000. They contribute $3,000 annually to church and charity. Under the new tax law they will receive no tax deduction for the charitable gift. However, if they contribute $9,000 to a DAF they will receive a deduction and can use the fund to implement their charitable contributions for the next three years to their favorite charities.
What other provisions in the new tax law should I be aware?
The tax law increases the maximum deduction taxpayers can claim for cash donations to public charities to 60 percent of adjusted gross income from the current 50 percent. It applies to a gift to the donor-advised fund and helps secure the maximum deduction.
If you’re 70 ½ or older, you also might consider a qualified charitable distribution, or a direct transfer of funds from your IRA custodian to a qualified charity. While,the federal tax law does not allow donors to apply qualified charitable distributions to a donor-advised fund at the Long Island Community Foundation, donors can give to a non-advised fund or to the Annual Fund, which will support the issues and causes you care about — children, hunger, the environment, or critical needs of Long Islanders.