The biggest change to charitable giving under the Tax Cuts and Jobs Act may come from the increase in the standard deduction. The act almost doubles the standard deduction in 2018 to $12,000 for single and $24,000 for joint filers under age 65 (those over 65 can deduct an additional $1,300). This higher deduction will drastically reduce the number of taxpayers who itemize, thus causing many charities to fear a reduction in charitable gifts. So what are some of the best ways to make charitable gifts under the Act?
- Bunching gifts into alternate years. This technique would allow you to itemize deductions due to larger gifts made in one year followed by a year or two of taking the standard deduction.
- If you are older than 70 1/2, make qualified charitable distributions from your IRA. Contribute up to $100,000 directly from your IRA to charity without tax.
- Establish and make gifts to Donor Advised Funds. This would allow you to take a deduction now and make gifts in years to come.
- Make gifts of cash. If itemizing, gifts of cash are now deductible up to 60 percent of adjusted gross income (up from 50 percent); gifts of stock remain deductible up to 30 percent of AGI.
- Make gifts of highly appreciated assets. Avoid owing capital gains tax and take full value as charitable deduction.
- Make gifts that will pay income. Charitable gift annuities and charitable remainder trusts allow you to get a deduction now but continue to receive income from the gifted asset for the rest of your life.
- Include gifts in your estate planning. Beneficiary designations and gifts from trusts, IRAs, and life insurance can name charities as a beneficiary.