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Charitable Giving Strategies for 2019

The Tax Cuts and Jobs Act (TCJA) passed in December of 2017, made changes to the deductibility of charitable donations made to qualified charitable organizations by the end of this year:

Standard Deduction Increased

The first change, which increased the standard deduction[1], made it less likely for many taxpayers to itemize deductions. By taking the standard deduction, these  taxpayers receive no deduction for charitable giving.

 Contribution Limitation Increased for Cash Contributions

At the same time, Congress increased the annual percentage limitation for itemizers who make cash contributions to 60% of their adjusted gross income. Other annual percentage limitations range from 20 to 50% depending on the type of charitable gift and the type of charity that receives it.

Optimize Deductions When You Itemize

If you itemize deductions, consider the following ways to optimize your charitable contribution deduction.

  1. Establish a donor-advised fund to contribute to the charity or charities of your choice. Once established, your contribution to the fund is deductible in the year made (subject to annual income limitations.) The funds can be invested as you desire with tax free growth and donor-directed grants made to IRS-qualified public charities. (Note: The fund managing agency you choose will be responsible for monitoring grants for eligibility and conformity with IRS guidelines.)
  2. If you are over 70 and 1/2, consider giving directly from your taxable IRA. For taxpayers meeting the age requirement, the IRA distribution rules allow for the tax-free treatment of distributions from IRAs where the distributions are donated directly to a charity. Specifically, a taxpayer may exclude from gross income so much of the aggregate amount of his “qualified charitable distributions” not exceeding $100,000 in a tax year. These distributions count for the required minimum distribution of the taxpayer and can be made by both taxpayers if each spouse has eligible funds in an IRA.
  3. Document any out of pocket expenses incurred as a volunteer. If you incur expenses on behalf of a charity, you must keep detailed records of your expenses.  If the total expenses are $250 or more, you must also have a written receipt from the charity describing the services provided and any consideration received from the charity.

As always, be sure to review your specific situation with your tax advisor to make sure you qualify for a current year deduction or carry forward. 

 

[1]The standard deduction for 2019 is : $12,200 for single filers (or married filing separately), $18,350 for head of household, and $24,400 for married filing jointly (adjusted for inflation).