The great majority of Americans who were able to get a tax deduction for giving to charities in prior years may no longer itemize and take advantage of such deduction in year 2018 and thereafter. This is a result of the doubling of the standard deduction by the Tax Cuts and Jobs Act that passed last December. As a result, some might consider strategies that they may not have previously used.

Taxpayers over 70½ who have qualified retirement accounts (such as IRAs and Roths) who are required to make a minimum distribution (RMD) and who no longer itemize due to the doubling of the standard deduction and who want to give to charity should now consider making such contribution directly from the qualified retirement account to the charity (which is permitted by the PATH Act of 2015) since there would be no income taxation on the distribution (normally distributions from retirement accounts are subject to income tax). This “qualified charitable distribution” (QCD) may also benefit some seniors since it would not increase income taxes on Social Security benefits that sometimes happens with RMDs. The limit in a year for a QCD is $100,000.

Another consideration for many taxpayers (that will be considered more than in prior years) who normally give to charities is to “bunch” all charitable gifts in one year instead of two or more since they may not otherwise get a deduction due to the doubling of the standard deduction and the taxpayer no longer itemizing. As a result, it is anticipated that more taxpayers will use a donor-advised fund since you can commit to several years of contributions in advance, but you can take the deduction immediately.

Of course, as in prior years, many taxpayers give low-basis (generally the purchase price) stocks or other assets to a charity or a donor-advised fund instead of selling an appreciated asset and then giving cash as you would not have to pay the capital gains tax.

It may be better to give than receive – but it is best to know the options on how to give since many believe charity begins at home.

If interested in knowing more about “Estate Planning Essentials”; consider registering for our next free workshop on Saturday, December 15, 2018 at 10:00 a.m. or on Thursday, January 10, 2019 at 1:00 p.m.

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