The tax benefits of the charitable giving have become harder to obtain since the passage of the Tax Cuts and Jobs Act at the end of 2017. Although the tax code still allows a tax deduction for both cash and noncash contributions to qualified charities, the tax incentives associated with these gifts have changed. Because the new tax reform plan essentially doubles the amount of the standard deduction, the sum of all charitable donations must now exceed a much greater amount in order for a taxpayer to realize a tax advantage by claiming them. This being the case, some innovative charitable giving strategies may be considered. Some of the ways of receiving a tax benefit from charitable giving under the provisions of the new tax reform plan are discussed below.
· Bundle Charitable Gifts into a Single Year
The Tax Cuts and Jobs Act of 2107 increased the amount of the standard deduction from $6350 to $12,000 for single filers and from $12,700 to $24,000 for married couples. With these significant increases, fewer taxpayers will receive a tax benefit from charitable giving because the total amount of all charitable contributions must now be almost double what it was in 2107 in order to achieve a greater tax advantage than that provided by claiming the standard deduction. One way to get around this dilemma is to bundle into a single year charitable gifts that would previously have been spread over several years. This method allows the contributing taxpayer to realize the desired societal benefits of charitable giving while still saving tax dollars by exceeding the amount of the standard deduction for the year in which the contributions are made.
· Make a Charitable Gift of Appreciated Property
A less traditional method of making a charitable contribution is to make a charitable gift of appreciated property. While this is a tax planning strategy used most often by high income earners and individuals who are trying to offset capital gains taxes, it can provide tax benefits for anyone who uses it. When appreciated property is donated, the donating taxpayer receives a charitable deduction for the full fair market value of the property while avoiding paying capital gains taxes on the appreciated value of the asset. Although stock is the most widely utilized appreciated property donation, other types of property can also be donated.
· Establish a Charitable Remainder Trust
Another available charitable giving option is the Charitable Remainder Trust. Often used by high income taxpayers, such trusts allow an individual to make a contribution to the trust and receive a tax deduction for the amount of the donation in the year it is made. The contributing taxpayer or their beneficiaries then receives an income from the trust for life or for a specified period of time, at the end of which the remainder of the initial donation is given to the chosen charitable beneficiary. This vehicle is valuable tax planning tool in that it allows a taxpayer to receive a large charitable contribution deduction by making a future charitable contribution. Although charitable bequests are common at the time of death, the Charitable Remainder Trust has the advantage of allowing the contribution to be made at a time in a taxpayer’s life when it may offer greater tax benefits as well as providing future income. With the doubling of the standard deduction making the benefits of traditional charitable giving harder to obtain, it is simply another option to consider.
Conveniently located in Beverly Hills, California, Los Angeles Bookkeeping employs Certified Public Accountants and licensed Enrolled Agents who are prepared to help you modify your previous charitable giving strategies in order to obtain the maximum possible tax advantage under the provisions of the new tax reform plan. Don’t hesitate! Contact the experienced tax professionals at Los Angeles Bookkeeping today! Call us at 310-765-1596 or email us at firstname.lastname@example.org to develop a charitable giving plan designed to save you valuable tax dollars.