No doubt, the Tax Cut and Jobs Act (TCJA) of 2017 will change your tax planning in one way or another. Despite any alterations to your planning process, there’s one thing that won’t change: the desire held by many people to donate to the charities and causes they care about. And this drive to give typically remains with or without a charitable tax deduction. Americans give because they want to make a meaningful difference in the world — to share the success they’ve enjoyed. Of course, a charitable tax deduction certainly doesn’t hurt anything either.
Did the TCJA eliminate deductions for charitable donations?
The short answer is no. When itemizing deductions on Schedule A, for example, taxpayers can still enjoy a break for any charitable giving. But, the new law did change several other itemized deductions by either eliminating them or limiting them. Additionally, it nearly doubled the standardized deduction. The standard deduction is now $12,000 for single filers and $24,000 for married filing jointly. For taxpayers who are 65 or older, blind or disabled, an additional $1,300 is available. This increase is a good thing, but this along with the other changes means many taxpayers will stop itemizing deductions and simply take the increased standard deduction. This means you won’t be able to write off any charitable donations. Or does it?
According to a Forbes article, What the New Tax Law Means for Your Charitable Giving, published in March 2018, a donor advised fund provides a simple way to continue giving to your favorite charities. The author points out that making a large initial donation to a donor advised fund, or adding to an already established fund, may allow you to itemize deductions for that year, provided the gift is large enough to itemize. Contributing to a donor advised fund allows you to pool your donations into one charitable investment account, deduct the entire contribution in the year you make it and then decide which charities you want to support on your own convenient timetable. In years when potential itemized deductions do not exceed the standard deduction, you can make a grant to your favorite charity anyway, thus continuing your support and building your philanthropic legacy.
Another great benefit of a donor advised fund is the ability to donate a wide range of asset types including cash, appreciated marketable securities, non-marketable securities (closely-held C-Corp and S-Corp shares), limited liability arrangements, real estate, life insurance and other assets types, while claiming an immediate income tax deduction and avoiding capital gains tax. This may amount to quite a sizeable donation in the end, which may allow you to itemize deductions in that tax year.
Talk to your tax planning professional or financial advisor about how a donor advised fund can help you continue to enjoy making a difference in the world. A donor advised fund will allow you to receive the best tax benefits available from your charitable giving and will allow you to keep your financial advisor managing your investments on your preferred custodial platform.