With the calendar turning to November, it is not too early to think about your year-end charitable giving. The 2017 Tax Cuts and Jobs Act put in place many changes that will impact charitable giving. While taxes should never be the sole reason for giving, with the assistance of qualified advisors, solutions still exist to make charitable giving worthwhile from a tax standpoint. Here are some ideas to talk over with your tax advisor:
- Bundle Gifts. With the higher standard deduction, it may make charitable giving less beneficial from a tax standpoint. Consider bundling gifts so the amount becomes deductible in one year. Instead of giving your normal gift in one year, you multiply it by two or three times and then don’t give again for another few years. If you would rather dole it out to the charity in the same amounts, consider using a donor advised fund (DAF) as part of the strategy. You give the bundled gift to the DAF in year one, thus getting the full deduction in that year, and then you have the DAF make distributions to the Charity in the normal amount over the two or three year period.
- Name the Charity as the Beneficiary of your Retirement Account. IRAs and similar tax deferred retirement accounts are an excellent and tax-efficient way to include charitable giving in your estate plan. If you desire to make a charitable bequest, you can designate the charity as a beneficiary on the retirement plan assets and then leave other non-retirement assets to the other non-charitable beneficiaries. Unlike your children, the charity does not pay income tax on the distribution from the retirement account and thus it retains its full value when received by the Charity.
- IRA Charitable Rollover. If you are at least 70½ years of age, you can use what is known as the IRA Charitable Rollover. The IRA Charitable Rollover allows individuals who have reached age 70½ to donate up to $100,000 to charitable organizations directly from their IRA without treating the distribution as taxable income, potentially keeping you in a lower tax bracket.
Other more complex strategies, such as the use of charitable trusts, may also be worth considering. The calendar is turning quickly. Don’t wait to visit with your advisor on potential charitable strategies that you can adopt as part of your planning.