As many of you are aware by now, the Tax Cuts and Jobs Act (TCJA) almost doubled the standard deduction for many taxpayers, raising the limits to $12,000 for single filers and $24,000 for married joint taxpayers. Naturally, this makes it more difficult for taxpayers to write off charitable giving.
While there is a bi-partisan effort to push for charitable deductions for non-itemizing taxpayers (H.R. 5771), below are some steps you can take to maximize your charitable efforts in the meantime:
1. Bunching: Make the bulk of your charitable donations in the tax years you expect to itemize deductions and skip gift-giving in other years. For instance, if you’re already contemplating a large gift in 2018, you might be a little extra-generous toward the end of the year to include your donation goals for 2019, increasing the tax payoff for the 2018 tax year. In 2019, you can skip or reduce your gifting efforts, since you included these gifts in the 2018 tax year.
2. Donor-advised funds: With a donor-advised fund (DAF), you can make a large initial contribution this year and qualify a deduction. Then, the DAF distributes this money to your favorite charities over a period of time. This has the same practical effect as bunching.
3. Gifts of property: This is one of my favorite techniques. By giving capital gain property that has appreciated in value, like appreciated stock, art, or other collectibles, you can generally deduct the property’s current fair market value, instead of its initial cost. Thus, you increase your deduction while avoiding tax on the appreciation in value.