1st Quarter 2018

New Strategies for Charitable Giving

Last year had a big impact on charitable giving. The hurricanes and other high-profile disasters made people think a lot more about helping others in need. But the new tax law that was signed in December nearly doubled the standard deduction starting in 2018, which means that fewer people will itemize their deductions — and you can only deduct your charitable contributions if you itemize. But there are still ways to help charities and get some financial benefits as well.

  • Consider bunching your contributions into one year. Rather than making smaller contributions over several years, you may want to consider making larger contributions every few years. You'll be able to deduct your contributions if your itemized deductions are larger than your standard deduction, which is $12,000 for single filers, $18,000 for head-of-household filers, and $24,000 for married couples filing jointly in 2018. Making larger charitable contributions in one year, plus other itemized deductions (such as up to $10,000 in state and local taxes) could help you cross the threshold to benefit from itemizing rather than taking the standard deduction that year.
  • Open a donor-advised fund. These funds, which are available through many financial institutions and community foundations, are a great way to build a charitable legacy. They also work well if you plan to bunch your contributions. You can contribute a large amount at once and deduct your contribution in that year (you usually need to make an initial contribution of $5,000 to $10,000 to open an account), but then you have an unlimited amount of time to decide which charities to support.
  • Give appreciated stock. If you own stocks or mutual funds in a taxable account (not a retirement-savings account), you usually have to pay capital-gains taxes when you sell the shares. If you've held the investments for a long time, the taxable gains may be significant. But if you give the shares to charity instead, the charity benefits from the gift, and you avoid having to pay capital gains taxes on the money. As long as you have owned the stock or fund shares for more than a year, you can deduct the current value of the stock as a charitable contribution if you itemize.
  • Give your Required Minimum Distribution (RMD) from your IRA to charity. After you turn 70½, you need to start taking RMDs from your traditional IRA, and you have to pay taxes on the withdrawals. But age 70½ also opens the door to giving up to $100,000 tax-free from your IRA to charity. These "qualified chartable distributions" count toward your RMD but are not included in your adjusted gross income. This allows you to benefit from your charitable gift, even if you don't itemize your deductions. The money must be transferred directly from the IRA to the charity; ask your IRA administrator about its procedures.

This is also a good time of year to start researching charities so you aren't scrambling at the end of the year to decide which ones to support. Sites such as Give.org and CharityNavigator.org can help you check out a charity and find out more about how it uses its contributions. You can also find out about local charities through your local community foundation (see www.cof.org/community-foundation-locator for links to community foundations).

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