By John Pollock
There are many advantages to giving to charity. While doing good is in and of itself its own reward, it also probably makes you feel like you've made a difference. Reaping the tax benefits from that charitable giving has also been a nice perk. While taxes might not have been at the forefront of your mind when providing assistance to others, the tax dehile doing good is in and of itself its own rewar duction for charitable contributions has typically helped shave money off your tax bill if you itemize instead of taking the standard deduction. Under the new Tax Cuts and Jobs Act, the deduction for donations is unchanged, but the bar is higher with the nearly doubled-standard deduction. ‘Tis the season for charitable giving, so make sure you do it correctly and stay on the nice list.
STANDARD OR ITEMIZED DEDUCTIONS
Charitable tax deductions go hand in hand with the standard deduction. In order to receive a charitable tax deduction, tax players have always needed to itemize deductions and have enough deductions to exceed the standard deduction.
The Tax Code allows you to subtract a standard deduction based on your filing status, or your total itemized deductions, whichever is greater. On your 2017 taxes, the standard deduction was $6,350 for single taxpayers, $9,350 for heads of households, $12,700 for joint filers, and $6,350 each for married couples filing separately. Under the new Tax Cuts and Jobs Act, beginning with your 2018 taxes, those rates go up significantly. In 2018 the standard deduction will be $12,000 for single taxpayers, $18,000 for heads of households, $24,000 for joint filers, and $12,000 each for married couples filing separately.
Although the charitable tax deduction has been preserved in the new law, with a higher standard deduction, it is likely to impact those who benefit from donating to charity. However, if your deductions are high enough, it will still make sense to itemize.
Charitable gifts were and are still eligible to be itemized, but there have been some changes. All charitable donations must be made to a qualified charitable organization. While many charitable organizations qualify for tax-deductible donations, you need to look for the 501(c)(3) designation to be sure. Remember that your donation to a qualified charity is deductible the same year in which it is made. Make sure that your donation is made by December 31 of the year in which you plan to claim a deduction.
Under the old law, your deduction for charitable gifts of cash was limited to 50% of your adjusted gross income. If your charitable gifts exceeded that ceiling, you could carry them forward for up to five years. Under the new Tax Cuts and Jobs Act, the ceiling is raised to 60% of your adjusted gross income. Additionally, the new law keeps the five-year carry forward. Something to keep in mind, some of the changes made by the Tax Cuts and Jobs Act will go away after midnight on December 21, 2025, unless they are extended. One of those changes is that the AGI limits on charitable contributions will drop back to 50%.
Charitable gifts aren’t just limited to gifts of cash, so it’s important to know the rules for various types of charitable gifts. If you are a college sports fan and you make contributions in exchange for athletic seat licenses, the old law let you deduct 80% of those contributions. Now, under the new law, there’s no deduction for those particular donations. While die-hard fans may be more interested in the seat than the deduction, it’s important to know. Donations of non-cash items, such as household goods, clothing, vehicles, and property, have specific guidelines that need to be followed in order to itemize those donations.
CHARITABLE PLANNING STRATEGIES
At Quartermaster Tax Management we know how to utilize the tax code to help you legally, ethically, and morally pay less taxes. It all starts with a quick free assessment to start the process for your own Tax Management Blueprint. Our Tax Management Blueprint is the most comprehensive, proven Strategic Tax Plan around.
Do you know about charitable planning strategies that can pay for themselves even if you’re not already charitably inclined? We use the IRS Tax Code comprehensively to ensure you only pay what you must. Every tax reduction strategy we employ in the Tax Management Blueprint is sourced and referenced directly to the IRS Tax Code.
Your Tax Management Blueprint is customized specifically to you and your business. Sources of tax savings directly from the IRS Code, along with implementation plans, are highlighted and summarized so you can be confident that the savings are real.
During this holiday season, charitable giving is and should remain, a worthy goal. See how to make the New Tax Law work for you and your business. Contact Quartermaster Tax Management today at 704-490-4111 to learn more about charitable planning strategies.