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Tis the season for good tides, merriment, and for some of us…donations to our favorite charities.  This week’s MoneyDo is Maximize The Tax Benefits Of Your Charitable Donations.

As a taxpayer, you currently get to use the larger of either:

  • The standard deduction – currently $24,000 for married couples and $12,000 for those who file single.
  • The total of your itemized deductions to decrease adjusted gross income. (The total of all your taxable income sources). Among other items, itemized deductions include state taxes paid and real estate taxes up to $10,000, medical expenses, mortgage interest and (of course) charitable deductions.

The law changes for 2018 increased the standard deduction, making it harder for those who donate to receive a tax deduction for charitable donations.  With less than two months until the end of the year, we suggest:

  • Reviewing your current charitable donations and considering if you’ll itemize in 2018. If you will itemize, it may be beneficial to ‘double up’ and donate your 2019 contributions prior to the end of December, allowing you to deduct two years’ worth of your donations in one year.
  • When appropriate, a Donor Advised Fund may be a good course for some taxpayers and allow you to frontload their charitable donations.
    • A Donor Advised Fund is a philanthropic vehicle established at a public charity.
    • It allows donors to make a charitable contribution, receive an immediate tax benefit and then recommend grants from the fund over time.
    • Using a Donor Advised Fund allows “frontloading” several years of donations to a trust, allowing all of the donations to become deductible in 2018.
      • Once frontloaded, you can then forward those donations to a desired charity in later years, thus taking a deduction in 2018 for a donation made in 2019 or any future year.
  • If you’re 70 ½ years of age and still haven’t yet taken your RMD (required minimum distribution) you’re able to donate your RMD to charity through a process called a QCD (qualified charitable distribution). QCD allows a taxpayer to claim both the standard deduction and the charitable donation.  Visit our blog post to if you are interested in learning more about this strategy:  https://annexwealth.com/annex-wealth-management-team/charitable2018/ .

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