How the New Tax Law Impacts Charitable Giving

As people think about year-end giving, they may want to take changes to the federal tax law into consideration.

The new tax law, passed by Congress this time last year, nearly doubles the threshold that can be deducted for charitable giving. Taxpayers will see their standard deductions for individuals jump from $6,350 for 2017 taxes to $12,000 for 2018 taxes. Married couples filing jointly will see an increase from $12,700 to $24,000.

That has some charities concerned that giving will be down this year, as people will have less incentive to give because it will be less likely that itemized expenses will be greater than the standard deduction. Also, the new cap on itemizing state and local tax deductions may lead more people to take the standard deduction rather than itemize.

“The charities are petrified that they are going to see a decrease in charitable giving,” said Leesburg certified public accountant Gordon Caylor. “This happens every time they change the tax law.”

Caylor said there are a few avenues he’s suggesting to customers who want to give, and want a tax benefit while they’re at it.

  1. Taxpayers can donate their time, for example driving for Meals on Wheels or to and from a charity, and receive a 14-cents-per-mile tax reimbursement for miles driven.
  2. People 70-and-a-half years and older can donate their required minimum distribution—up to $100,000—from their IRA directly to a charity tax-free.
  3. Taxpayers can transfer appreciated stock to a charity, receive a tax deduction, and not be required to pay capital gains tax on those donated funds.
  4. Taxpayers can also put money in what’s called a donor advised fund—which Caylor says most mutual fund companies offer—that can hold enough money that can be doled out to charities over several years, but the funds can be deducted from the taxpayers’ taxes in that first year.

“With the new tax law, we’re suggesting some of these options that are more tax-efficient,” Caylor said.

Learn more about how the new tax law may affect charitable giving at fidelitycharitable.org.

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