years past, nearly one-third of all annual donations
were made in the month of December, as people made their
charitable gifts before the deadline for tax deductions.
year, if you’re more focused on getting back in the
form of a tax break come April, you may want to think
twice about how many year-end checks you write to
or won’t you be able to take a tax deduction for
charitable contributions on your 2018 tax return?
rules for 2018 will be vastly different than they were
last tax season, thanks to the Tax Cuts and Jobs Act of
taxpayers will no longer be itemizing deductions
beginning on their 2018 federal tax returns because of a
higher standard deduction and other significant changes
tax rules, including new limits on deducting state and
local income taxes and property taxes.
46.5 million tax returns itemized deductions for 2017.
It’s estimated that the number will drop to 18 million
for 2018 returns — or about a bit more than 10 percent
of individual returns, according to the Joint Committee
So do you
need to really make a donation by Dec. 31? Or can you
wait until January? Or even February?
standard deduction on 2018 returns is $12,000 for
individuals, $18,000 for heads of household and $24,000
for married couples filing jointly and surviving
spouses. Those amounts are nearly double what they were
still consider itemizing — if your itemized deductions
exceeded those amounts.
philosophical advice is give to charity, if you want to
give to charity,” said Leon LaBrecque, managing
partner and CEO, LJPR Financial Advisors in Troy, Mich.
don’t worry about the write-off.”
all, many people give to animal shelters, food banks,
their alma mater and religious organizations because
they’re genuinely grateful and want to help others do
people try to plan their giving to maximize their tax
breaks. If so, you need to take into account the new
standard deductions, as well as other changes.
new rules, for example, employees will no longer be able
to itemize their unreimbursed business expenses
beginning on 2018 tax returns. Most taxpayers — with
the exception of members of the military on active duty
who move pursuant to a military order — won’t be
able to deduct qualifying moving expenses related to a
expenses are deductible but only if those expenses
exceed 7.5 percent of your adjusted gross income in
2018. (On the 2019 return, the threshold jumps to 10
key change: The deduction for state and local income
taxes, property taxes, personal property taxes
(including license tabs on cars in Michigan) is limited
to up to $10,000 for every filing status except married
filing separately, which is $5,000.
changes, LaBrecque noted, can make it harder to simply
look at your old deductions and think you’d easily hit
that threshold to itemize again on the 2018 return.
people may still want to keep their receipts and proof
of deductions because it is hard to simply guess whether
you’d still itemize or you won’t.
still have to do all the same things you used to do,”
said Kathy Pickering, vice president of regulatory
affairs and executive director for the H&R Block Tax
of taxpayers will have this expectation that tax filing
will be so simple and easy, they won’t have to worry
about it,” Pickering said.
that’s not necessarily the case, she said.
who carefully review their situation with their tax
preparer may be able to tap into a few different
strategies, depending on their situation. They include:
Bunching deductions in a given year
strategy is called “bunching” — where you pull
contributions into one year in order to be able to
itemize deductions. LaBrecque noted that such a strategy
can work if you’re near the standard deduction limit
and want to add more charitable contributions in a given
year to enable you to itemize.
you’re well under the standard deduction, he said,
you’re not going to be able to deduct donations to a
charity short of a very large donation in a given year.
But that has always been true and many people still make
charitable contributions anyway.
change on 2018 returns: Individuals can take a deduction
for charitable cash donations that amount to up to 60
percent of their income, up from an earlier limit of 50
percent. So individuals who donate a sizable portion of
their income to charitable organizations will be able to
take a larger deduction.
Opening a Donor-Advised Fund
have a significant amount of money to donate, you can
make a lump-sum contribution into what’s called a
be able to deduct the full amount of the contribution in
the year you make it, up to the contribution limits
based on the type of asset donated and your adjusted
people haven’t heard of such programs but total assets
in donor-advised funds hit about $110 billion at the end
of 2017. And experts say they’re being used by more
than just ultra, high-net worth individuals.
overhaul in the tax rules could make such plans more
popular among people who want to use some of their money
to make a difference in the lives of others.
tax standpoint, the lump-sum approach can be used to
help push you above the new higher amount for a standard
deduction in a given year.
make a donation upfront into a donor-advised fund but
then be able to give a grant to your favorite charities
in the future out of the donor-advised fund.
funds can be opened at a community foundation, such as
the Community Foundation for Southeast Michigan, or
through an arm of financial service firms.
is then invested and you’d later recommend grants to
qualified public U.S. charities. (The grants out of the
donor-advised fund are not tax deductible.) There are
administrative fees, as well as investment fees,
connected to such accounts.
need at least $5,000 to open a donor-advised fund
through some programs, including Fidelity Charitable,
TIAA Charitable and Schwab Charitable.
minimum gift is $10,000 to establish a donor-advised
fund within the Community Foundation for Southeast
Carnal, president and chief executive officer at TIAA
Charitable, said the money or other assets set aside in
donor-advised funds is irrevocable and must be used for
charitable contributions. You can’t donate gifts to
family members, either. There are other limitations on
how you use the money. Grant money, for example, cannot
be used to buy a table at a fund-raising event.
though, that as we approach the end of the year,
investors want to make sure they understand some
deadlines so that contributions can qualify for a 2018
you’re electronically transferring money from a bank
account, for example, you’d be able to do so by Dec.
26. But earlier deadlines in December would apply to
donating stock to the fund.
a unique bonus for someone 70 and a half or older
who are 70 and a half or older generally must take a
Required Minimum Distribution from their traditional
IRAs and 401(k) plans each year, but not from Roth IRAs.
the tax burden, someone who is age 70 and a half or
older can transfer up to $100,000 directly from a
retirement account to a qualified charity. By
transferring the money to a charity, you’re not
driving up your taxable income in a given year as you do
when you withdraw money from such retirement accounts
cannot use this strategy to boost your deductions. But
if you’re not able to itemize anyway, it still
provides a way to reduce your tax bill.
note that such a move can help control what percentage
of Social Security benefits might be taxed and things
like the Medicare surcharge on high income