Now that the new tax law has been enacted, there are several new provisions that impact charitable giving. The doubling of the standard deduction may lead to new patterns of giving for many of our donors. Below are a few things to consider in your future giving strategy:
- The stock market has done tremendously well over the past year. Gifts of appreciated assets will still be one of the most tax effective way to give with donors getting a fair market value deduction on stock gifts while avoiding capital gains tax. Donors should also examine their other assets (business interests, closely-held stock, real estate, etc.) for the potential of a charitable gift – minimizing taxation and maximizing philanthropy.
- The IRA Charitable Rollover is intact. The law keeps intact the ability to make Qualified Charitable Distributions (QCDs) directly from your IRA up to $100,000 each year. If you are 70 ½ or older and have Required Minimum Distributions (RMD’s) that you must take from your IRA, making a Qualified Charitable Distribution (QCD) from your IRA to your favorite charity is a tax wise way to make a gift. Distributions of up to $100,000 may be made each year and the amount will count towards your RMD but will not be recognized as income on your tax return. The distribution must come directly from your IRA custodian to the charity. This is a great way to create or add to a scholarship, unrestricted or designated fund at the Community Foundation. Unfortunately, the new tax law still does not allow QCD’s to donor-advised funds.
- Taxpayers who itemize may now deduct up to 60% of their adjusted gross income each year, up from 50%, for cash gifts. The deduction on appreciated assets (e.g. stocks) was maintained at 30%. If you cannot deduct the full amount in the year of the gift the balance can still be carried forward for 5 years. The Pease limitations that reduced the itemized deductions of higher income earners have been repealed. So those higher income charitable givers are not taking a haircut on their deductions like under previous tax law.
- We anticipate that some of our donors who have a donor-advised fund at the Foundation may use their fund to “bunch” their gifts. For example, they might put a larger amount into their fund in one year so they can itemize their charitable gift and then makes grants out of their fund to their favorite charities over several years. So, they may bunch their charitable giving into one year to receive a more favorable tax benefit.
Do you or your professional advisor have questions or need more information? I’d be happy to talk – please reach out to me at firstname.lastname@example.org.