Charitable Giving Under the New Tax Law

The new tax law may discourage donations, but you can still support your causes and reduce your tax bill using these strategies

The chance to get a deduction for their generosity often motivates charitable givers to become even more generous and write larger checks. But under the Tax Cuts and Jobs Act, far fewer taxpayers will itemize deductions when they file their tax returns for 2018—and beyond—compared with 2017. That is making some charities rather nervous.

The new tax law nearly doubles the standard deduction in 2018—to $12,000 for singles and $24,000 for joint filers younger than age 65—while capping or eliminating other deductions. That means it will no longer make sense for as many taxpayers to itemize.

If you are close to the threshold for taking the standard deduction, you may be able to get a tax break for your donations by employing a tactic called bunching. Basically, you make two or more years’ worth of donations in a single year so that—along with your other deductible expenses—you’ll end up with enough deductions to itemize that year. Then you skip donating the next year or two and revert to taking the standard deduction.

Another option is to set up your own charitable fund, also known as a Donor-advised Fund. Contributing to one allows you to pool your donations in one pot, deduct the entire contribution in the year you make it and then spend time deciding how you want to dole out grants. You can continue to give in “off” years—on a more regular schedule that will benefit the charity, too—while taking the standard deduction.

For more information on these tactics, please contact your HW&Co. tax advisor