News

Dec
10

Last Chance to Give (in 2018)

Filed Under: Philanthropy - Posted @ 11:55am

Photo by rawpixel on Unsplash

Any time of the year is a great time to support good work in the community, but December is the most popular. About 30% of all contributions are made in December, and the last three days of the month account for 12% annually. The holiday season is a major factor in people’s generosity but meeting year-end tax deadlines also drives the timing.

**If you are planning on making an end-of-year gift in-person to GTCF, be sure to visit the office by Friday, December 28. GTCF offices are closed on Monday, December 31. However, a mailed contribution postmarked by December 31 will still count as a 2018 gift.**

Congress passed major tax law changes last year. Those changes could affect your giving strategy, especially as 2018 draws to a close. Here are some ways of giving that could maximize your tax savings before the New Year.

  • Contributing to a Donor-Advised Fund – Making a cash donation to a donor-advised fund (DAF) provides an immediate income tax deduction, giving donors a chance to manage gifts to multiple charities or defer giving to a later date.
  • Making a gift of appreciated assets – Selling an appreciated asset, like stock, generates income tax on the gain and could be subject to an additional net investment tax of 3.8 percent. By donating an appreciated asset directly to a charity, the organization receives the full value of the asset and the donor can potentially take a fair market value deduction.
    In order to benefit from the fair value deduction, the appreciated asset has to meet certain criteria and may still be subject to adjusted gross income limitations. Substantially appreciated investments are ideal candidates for this type of non-cash giving.
  • Distributing an IRA RolloverIf you are age 70½ or older, it’s possible to make tax-free distributions to charitable organizations (up to $100,000 per year) from your Individual Retirement Account (IRA). With an IRA Charitable Rollover, the money directed to charity is excluded from income for federal income tax purposes, and the amount counts toward any required minimum distribution for that year. Currently, IRA Charitable Rollovers cannot go into a Donor Advised Fund. An IRA administrator can provide more details.
  • Bundling gifts every other year– Following last year’s tax changes, the standard deduction is now $24,000 for married couples. To receive a tangible charitable contributions tax benefit, the sum of the state and local tax deduction (limited to $10k under the TCJA), mortgage interest deduction and charitable contributions must exceed $24,000.
    If a donor bundles charitable contributions, making larger gifts every other year, this can increase itemized deductions to a level that surpasses the standard deduction every other year. (Take advantage of the standard deduction in the alternate years).
    A donor-advised fund enables a donor to make a large contribution every other year, while distributing contributions to organizations at a later date.
    If the bundled gift exceeds AGI limitations, though, there could be tax consequences.

    • Example Scenario
      Consider a taxpayer with a 2018 property tax deduction capped at $10,000, a mortgage interest deduction of $8,000, and who historically makes charitable contributions of $5,000 at the end of the year. The total itemized deductions for 2018 would be $23,000 ($1,000 less than the new $24,000 standard deduction).
      In this situation, the taxpayer would receive no charitable contribution tax benefit.
      As an alternative, the taxpayer could wait until January 2019 to make the $5,000 charitable contribution and, before the end of 2019, donate an additional $5,000.
      In this scenario, the taxpayer would still benefit from the $24,000 standard deduction in 2018. However, in 2019, the taxpayer could itemize deductions because the updated itemized total would be $28,000 ($4,000 higher than the standard deduction).Bundling charitable deductions in 2019 provides tax savings that are not realized if $5,000 is donated annually for 2018 and 2019.

The new tax law’s changes to the itemized deduction limits and the increased standard deduction make it important for all taxpayers to re-examine their personal deduction strategy and charitable giving approach to maximize their after-tax impact. Donors should consult their tax advisor to make the best decision for their situation.

Greater Tacoma Community Foundation can assist you in opening a donor-advised fund and learning more about making an impact in the community through philanthropy. Call 253-383-5622.

**If you are planning on making an end-of-year gift in-person to GTCF, be sure to visit the office by Friday, December 28. GTCF offices are closed on Monday, December 31. However, a mailed contribution postmarked by December 31 will still count as a 2018 gift.**