LET YOUR GIFT BE YOUR LEGACY
December is traditionally a time of giving. It’s the holiday season where gifts are exchanged and people reach out to help others, including organizations that do good in the world. Many charitable organizations receive their largest contributions in December.
While most charitable contributions are not motivated by tax write offs, this incentive has been engrained in society for the past 100 years. It was 1917 when charitable giving was approved as a tax deduction. The War Revenue Act of 1917 was adopted shortly after the US entered the war (World War I). The idea behind the act was to provide support for charities who otherwise might not survive the war.
Exactly 100 years later, in 2017, the Tax Cut Jobs Act was passed, changing the landscape for charitable giving. The new law reformed individual and corporate income tax. It increased the standard deduction and family tax credits, and eliminated personal exemptions, making it less beneficial to itemize deductions. What does all this mean if you are making charitable contributions? And how can you still give and save on your taxes?
Know the Rules
Understanding the ins and outs of the new tax laws can help you set goals. Most importantly, know what tax bracket you are in and the standard deduction amount. Here are the tax brackets for 2017 and 2018 so you can compare the changes.
The new law doubled the standard tax deduction, which means fewer people will probably itemize their taxes. But, you can only make deductions if you itemize your taxes. Try to take advantage of itemizing by consolidating charitable donations. So instead of giving smaller amounts for two years in a row, give two or three year’s worth of donations in the same year so the gift is enough to deduct.
Consider a Donor-Advised Fund
A donor-advised fund is a charitable investment account established specifically to support a charitable organization you care about. It allows individuals to make a charitable contribution and receive an immediate tax deduction of up to 30%, then recommend grants from the fund over time. Direct donation of publicly traded securities is one of the most common ways to set up this type of fund.
Know the Value of Your Gifts
Most people give to a cause or charity because they believe in the purpose and the mission and want to be a part of it. Don’t lose sight of this. The gifts you give may be deductible in a given year, but their benefits can be life-changing for the cause you are supporting. Imagine knowing that because of you and your support, research was conducted that led to a cure for essential tremor. Let your gift be your legacy.
Everyone’s personal finances are different and tax laws can be complicated. For more information check with your financial advisor or tax consultant to create a plan that works best for you.