With the first tax returns under the regime of the Tax Cuts and Jobs Act (the “Act”) being filed, many people will be thinking about how their charitable donations didn’t have the same impact this time around. The reason for this difference is the increase in the amount of the standard deduction (it almost doubled under the Act).
The standard deduction in 2019 is $12,200 for individuals and $24,400 for married couples filing jointly. Because you take the greater of either the standard deduction or itemized deductions, which include charitable donations, the increase in the standard deduction makes it far less likely that you will have enough itemized deductions to deduct them in lieu of the standard deduction. In short, if you take the standard deduction, then any charitable donations made during the year are not deducted on your return.\
While tax benefits are not the only reason to give, nor the primary reason for most people, the Act is causing many donors to reexamine their giving habits. The good news is that, with proper planning, there is no reason that the change in law has to negatively impact donors or charities. Nor does this planning have to be complicated!
One of the easiest ways to still take advantage of the deductibility of charitable donations is to “bunch” or “bundle” charitable gifts that would have been made over a span of years into one year. While one option is making a larger, lump sum gift, this may not be financially feasible or desirable for some donors. A different option for those wishing to spread donations out is to make a donation at both the beginning and end of one year, and repeat in alternating years. This bunches gifts into one year that might have been made in two years previously, and increases the likelihood of being able to deduct charitable donations.
You should consult your tax advisor or review your own financial information now to determine if, taken with your other itemized deductions, your plans for charitable giving can be adjusted to give you a better tax benefit this year.
