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Ten Charitable Giving Tips for 2018

The federal government made many changes to the U.S. Tax Code to be effective in 2018. These changes will affect most Americans, and may significantly affect taxpayers who itemized their tax deductions in recent years.

The tax code continues to treat charitable contributions favorably, and gives many tax preferences to taxpayers who make charitable gifts. Whether you’re doing tax planning for 2018 or a more comprehensive estate plan, here are a few charitable giving tips and ideas you might find useful.

  1. Bunch charitable contributions in alternate years. In 2018, the standard deduction has increased: $12,000 for single taxpayers and $24,000 for married taxpayers. (Add $1,600 if you’re over 65 and unmarried, and $1,300 if you’re over 65 and married). By making especially generous contributions every other year, you retain the ability to itemize in those years.
  2. Donate appreciated securities. You’re permitted to deduct the fair market value of the securities if you itemize. Even if you don’t itemize, you avoid paying capital gains tax on the appreciation.
  3. If you’re asset-heavy and income-low, you can now deduct cash gifts of up to 60% of adjusted gross income (formerly 50%), and up to 30% of gifts of appreciated securities. And you have a six-year carryover for unused deductions.
  4. Make a charitable gift that provides you with income, such as a charitable gift annuity. These gifts are partially tax-deductible and the annual income is tax-exempt.
  5. Give retirement assets. If you’re 70 ½ years of age or older, you generally must take required minimum distributions from your retirement plans. But the new tax code permits you to make some or all of these distributions to charity without paying tax on the withdrawal. This giving method is ideal if you want to support a charitable cause, don’t need the required minimum distribution, and want to minimize your overall tax burden.
  6. If you own real estate, say, a vacation home, consider donating it to charity through a life estate contract. You can remain in the home for the remainder of your life, and receive a partial tax deduction for the fair market value of the property.
  7. Consider creating a charitable trust that can protect your assets, provide you with ongoing income, and possibly entitle you to a tax deduction.
  8. Create a permanent endowment fund in your name, your family name, or the names of loved ones. Only the income and earnings from these funds are used to support programs or groups of people you cherish. It’s easier than you think.
  9. Although the estate tax has been reduced (new thresholds are $11 million for single taxpayers and $22 million for married taxpayers), it’s vitally important that you have a will. This simple document provides for the distribution of assets to your family and other loved ones, and gives you the opportunity to make gifts (bequests) to charity upon your death.
  10. Most taxpayers will see more disposable income as a result of the new tax code. Consider donating a portion of your increase to causes you love.

Although most donors appreciate tax savings, donors who support good causes know that the greatest benefit goes to the people being helped by their contributions. Making life better for others through charitable giving is one of the hallmarks of American life, and one of the ways that you can transform our community and our world.