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Gifting Under the New Tax Law

"How It's Still Possible to Take Advantage of the Charitable Tax Deduction"

Has the new tax law made the charitable deduction a thing of the past? The good news is that it has not, but the bad news is that for many families it may be more difficult to take advantage of this long time tax advantage.

The increase in the standard deduction amount to $24,000 ($12,000 for singles) per year and the elimination of other itemized deductions has effectively reduced the number of individuals that can itemize their deductions. According to the Internal Revenue Service, tax filers that can itemize will be reduced from an estimated 30% to 10% for the 2018 tax season. However, wise charitable gift planning may make it possible for you to continue to take advantage of the itemized tax deduction.

Consider this simple strategy. By using a Donor Advised Fund (DAF) at MB Foundation, you can front load, or bundle charitable giving into a single tax year, exceed the $24,000 itemized deduction level, and qualify for the itemized deduction in the current tax year. The following year, your giving can continue as planned out of your DAF while you take the standard deduction.

For example, let's say that you are a couple that has $10,000 worth of deductions from state and local taxes and $10,000 of charitable gifts. This would add up to a total of $20,000, which is below the new itemized deduction of $24,000. If you added to your giving an appreciated asset worth $10,000, you would not only avoid the capital gains on that asset, but it would increase your total giving to $30,000. This bundles charitable giving into a single tax year, qualifying you for the itemized deduction. This would mean a tax savings of about $2,200, if you are in the 37% tax bracket. The more you are able to bundle the first year, the greater itemized deduction you benefit from immediately. The key to this strategy is bundling your giving the first year, saving taxes by qualifying for the itemized deduction, and then continuing your regular giving plan from the DAF while claiming the standard deduction in the future.

It is possible to benefit substantially by planning ahead of time. Please call one of our planned giving advisors at 800. 551.1547 or email Jon C. Wiebe at jwiebe@mbfoundation.com for information on how we can assist you with this gifting strategy, or other planned giving advice.

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