Blog by Gary Wilburn, EA – Storen Staff Accountant
The 2017 Tax Cuts and Jobs Act made major changes to the tax code including a decrease in individual income tax rates and an increase in the standard deduction to $24,000 for a Married Couple and $12,000 for a Single Filer. The nearly doubled standard deduction means it may be more advantageous for taxpayers to file using the lump sum deduction rather than itemizing all the mortgage interest payments, state and local taxes, medical bills and charitable gifts.
One expected fallout from the new tax changes is that charitable giving will decrease substantially since the majority of Americans will not itemize. However, the most recent data doesn’t show the dire estimates are coming to fruition. Giving by corporations, foundations, and individuals only fell about 1.7% after inflation to $427.7 billion. Americans have already found ways around the new tax laws with these 3 ways to give:
A new term that has come out of the tax law which means doubling or tripling up on your charitable gifts in one year to exceed the standard deduction and then not giving for 1-2 years.
2) Qualified Charitable Deduction
If you are over 70.5 years and you are required to take a distribution from your IRA, your investment company can send the RMD straight to the charitable organization. This amount is NOT included in your taxable income which is even better than trying to take a deduction for the charitable giving. It may also decrease the amount of Social Security you have to pay tax on!
3) Setting up a personal Charitable Foundation with an investment company
Americans are making lump sum donations in one year (similar to Bunching) into a Foundation and then deciding at a later date the amount and the organization to give.
Related article from Bloomberg News: Trump’s Tax Law Made Americans Less Charitable, Nonprofits Say
“Americans gave less money to charities last year partly because the Republican tax law changes made many people ineligible for tax breaks that can inspire donations.
Giving by individuals fell an estimated 3.4%, after adjusting for inflation, last year, according to a report released Tuesday by Giving USA. The numbers reflect the first year of the 2017 tax overhaul that expanded the standard deduction, a simpler way of filing taxes, but also excluded millions of taxpayers from claiming a tax break for donating to charity.” Click here to continue reading this article.