The Tax Cuts and Jobs Act of 2017 was the first major legislative change to the tax code since 1986. While many of its’ changes left how the charitable deduction worked unchanged, the doubling of the standard deduction is predicted to reduce the percentage of taxpayers who itemize from 30% to 10% which effectively removes two-thirds of taxpayers who could have used the charitable deduction in 2017. This reduction has made many taxpayers in 2018 to ask the question of whether to itemize or not itemize their deductions. The good news is that there are still great taxwise ways to give to charity, either way, you answer that question.

Idea to consider if you don’t itemize- gift from your IRA

If you are 70 ½, you are able to make a charitable contribution, up to $100,000, to a public charity of your IRA and not incur the distribution as taxable income. You are not able to deduct the amount as a charitable contribution (but you would not be able to anyway as you are not itemizing your deductions) nor can you contribute it to a donor advised or a private foundation. Please know that these are just the basic details and you will need to discuss this technique with your advisor before implementing.  And good minds differ on the value of this strategy. 

Idea to consider if you do itemize- bunching a gift to a donor advised fund

If you are going to itemize your deductions this year, and might not do so next year, then you should consider a donor advised fund (DAF). With a DAF, you are able to claim a tax deduction in the year you make the gift and retain the right to advise the DAF sponsor of future public charity grantees in future years (full disclosure, our nonprofit is a DAFsponsor). This technique has been referred to as bunching and has been explored quite a bit over the past year in both the mainstream and charity media.

In conclusion, giving to the nonprofits whose missions you believe in can make a difference in the lives of the people they serve. Changes in the tax law can never change the difference you make. Finding a taxwise way to give to those charities helps you maximize your support of that mission by simply finding the best asset and structure to make your gift.

This article is informational and is not intended as tax or legal advice.  Please consult your professional advisors for how this information is applicable to your personal situation.