Techniques on how to make charitable donations more powerful under the new tax law
The motive behind every charitable contribution doesn’t necessarily have to come under any scrutiny as long as numerous lives get blessed through it. The act of donating has its own reward, reaping the tax benefits is a perk. Although the new tax law nearly doubles the standard deduction for individuals and families (It’s now $12,000 for single people and $24,000 for married couples filing jointly; for taxpayers who are 65 or older, blind or disabled, an additional $1,300 is available), the charitable deduction was left unchanged. This has some beneficial implications for donors who are interested in maximizing tax savings.
Let’s take a look at some charitable options that can help you achieve this aim:
Bunching or bundling itemized deductions: Donors having the flexibility to time the payment of qualifying deductible expenses may want to consider bunching or bundling these expenses, including charitable gifts, into alternate years. This may increase the likelihood of being able to itemize deductions in alternate years. If you make charitable gifts this way, you could notify the charity that your larger gift is for a two-year period.
Donor-advised funds: With this technique, you can make a large contribution in one tax year to establish or add to a donor-advised fund. If the gift is large enough, you may be able to itemize deductions that year. In subsequent years, when your deductible expenses are not large enough to itemize, you can ask the donor-advised fund administrator to make a distribution to a favorite charity, thereby continuing your support to it. It is also worthy to mention that Donor-advised funds are relatively inexpensive to establish and maintain; you can find out more about them by contacting a charity or seek advice from your legal consultants.
Gifts that return income: Sometimes, you might like to make a charitable gift but you also need income. In these cases, a charitable gift annuity or a charitable remainder trust may be the answer. Because these gifts require larger amounts, you may be able to itemize in the year they are funded. Only a portion of the contribution is deductible, however, because the donor receives income for life or for a period of years. These gifts are usually funded with cash, stock or real estate.
There are more than just these three options for achieving the objective of maximizing tax savings. For tax, investment, financial planning or legal advice it is advisable that you consult with your personal advisers. The Parc Bay team provides full-service and diligently work with you to select the option that best suits your circumstance. Our team provides a comprehensive plan with explicit details into any selected option and guarantees a positive result. We have been doing this for years- we’ve got you covered.
Consult with us today to learn more!