The Tax Cuts and Jobs Act of 2017 impacted charitable giving in ways that have confused many. Let’s address the changes, how individual charitable giving is impacted, and what questions you should consider as a result.
Tax Reform Changed Charitable Giving
Charitable contributions can only reduce your tax bill if you choose to itemize your taxes. Generally, you itemize when the combined total of your anticipated deductions—including charitable gifts—add up to more than the standard deduction.
Reaching “more” was easier before tax reform as the standard deduction was $6,350 for singles and $12,700 for married couples who file jointly. Now, that threshold is $12,000 and $24,000 respectively. If you no longer reach the threshold to itemize, you won’t be able to deduct your charitable donation on your personal tax return.
What comes next?
It’s going to take a little more planning and forethought to make charitable giving translate into a deduction on your personal return. When donating, the standard precautions are still good to follow:
- Make sure the non-profit organization is a 501(c) (3) public charity or private foundation.
- Keep a record of the contribution (usually the tax receipt from the charity).
- If it’s a non-cash donation, in some instances you must obtain a qualified appraisal to substantiate the value of the deduction you’re claiming.
You’ll also want to consider questions including:
- How much do I now need to give to charity to make a difference in my taxes?
- Which tax bracket am I now in and how does that impact my deductions? The higher your tax bracket, the greater your tax savings as a result of making charitable gifts.
- How could the change in state and local tax deductions impact my giving? The tax reform law capped federal deductions of state, local, and property taxes at $10,000, which means that many taxpayers have more difficulty collecting enough deductions to itemize.
Get your questions answered before 2019 ends
The considerations above might have you asking:
- Has the tax strategy I’ve used in the past still work?
- Is there anything I should do differently?
- Do I need to change how much I donate before the December 31 deadline?
At Brigade Bookkeeping we can help you support your favorite charities in smarter ways. We can discuss different charitable means and explain how you can maximize your current giving strategy in light of the new law.
Don’t wait until the end of the year. Contact us today for guidance on charitable giving.
Additional Sources:
“Will tax reform affect your charitable deduction? What you need to know.”
“7 charitable tax deduction questions answered”
“How to Deduct Charitable Donations”
