How to Be Good at Doing Good
Charitable Giving
The new tax law will eliminate the benefit of itemizing deductions for many Americans. While charitable contributions are still deductible, the threshold for itemizing has moved higher. For example, a married couple, filing jointly, now receives a standard deduction of $24,000. Property taxes plus state income taxes (the SALT deduction) are capped at a combined $10,000 deduction. You need another $14,000 in additional itemized deductions before itemizing is even going to be a viable option. Look at your current Schedule A as you are putting away your taxes this year. Look at the bottom line. If it’s over $24,000, then look at how much of it is in the second section. Anything over $10,000 will not be deductible next year. Additionally, you lose the deductions in the sixth section related to miscellaneous deductions. If you have a lot of mortgage interest or give a lot to charity, then you still might itemize. If you have minimal or no mortgage interest, then there’s a good chance your charitable deductions won’t help you on your tax return. However, there are some strategies that can help your taxes and still allow you to benefit your favorite charity.
- QCD – Qualified Charitable Distributions – if you are over 70 ½ and will not be able to itemize AND have required minimum distributions (RMD’s) from IRA’s, then this is an excellent strategy to consider. You can gift directly to a charity within certain limits and not report the income as taxable on your return. No need to itemize.
- Bunching gifting – You might consider larger gifts every other year to allow you to itemize your charitable contributions. You can make your gifts in December for the current and following year to your favorite charities. A donor advised fund is another way to consider donating a significant amount in one year but paying out charities over several years.
If you are charitably inclined, it’s important to be intentional and have a plan for your giving. Here are some additional ideas for your planning.
SET GOALS Before you know how to get there, you have to know where you’re going. Set charitable goals that are measurable and have a clear timeline before starting on a charitable giving strategy.
INVOLVE FAMILY Charitable giving is about more than just personal satisfaction—it’s about creating a charitable legacy. By involving your family with your plan, you can ensure that your charitable values are passed on to future generations.
CREATE A BUDGET Make sure your goals are realistic by consulting your budget and your financial advisor. It’s important to find the right balance of what you hope to accomplish in the world and how much you can reasonably afford to give.
EVALUATE ORGANIZATIONS Do some research before opening your checkbook. Verifying an organization’s legitimacy is important, as is evaluating its fiscal responsibility, mission statement and affiliations.
CHOOSE GIVING TOOLS Cash, trusts, securities, real estate, clothing, furniture, art and even vehicles—each will have different implications for your giving strategy. Consider which may be best based on your assets and your tax situation.
DEFINE SUCCESS Success won’t look the same for each donor. Periodically ask yourself: Have I met my initial goals? Am I on track to do so? If not, how can I improve the success of my plan for next year?