Tips for Charitable Giving with the 2018 Tax Bill
There have been big changes in how people are now giving to charities. The tax bill that was passed in December of 2018 included many provisions that found a lot of people changing from itemized deductions to receiving a much simpler $24,000 deduction (for joint filers). By doing this, people are thinking twice before making a charitable donation because it may no longer be deductible on their tax return since they don’t itemize. If you are one of those people, we have a few ideas for you.
One idea, if you are over age 72 and receive Required Minimum Distributions (RMDs – there is now a new age for them after the tax bill of 2019), is that you can choose to donate part or all of those RMDs to charity! The IRS has a provision that allows this donation to go directly from the IRA to the charity, counting as part of the required distribution. This is called a Qualified Charitable Distribution. This will have the effect of the income not hitting your tax return at all and so is actually better than a deduction.
Another option is to set up a Donor Advised Fund (DAF). This is an account that allows you to make lump sum contributions to the fund and claim the corresponding deduction on your tax return in the year made. Then, at your leisure over as many years as you would like, you can direct the DAF to dole out any dollar amount of your choosing to any charity. In order to make sure you can deduct it on your tax return, we suggest “bunching” your donations so that you make sure your itemized deductions are greater than your standard deduction. For example, you can donate 5 years’ worth of donations to the DAF to bump you into itemizing on your tax return one year. Then, you can divvy out the donations at your leisure over the next 5 years until you’re ready to do it all again!
And of course, you can ALWAYS give to charity without worrying about making it a tax deduction.
Caissa Wealth Strategies is a fee based registered investment advisory firm, specializing in personal, dynamic wealth management. Based in Bloomington, Minnesota, Caissa financial planning professionals provide individualized strategies for every client. You can expect more from CAISSA, and in turn, you will get a fiercely loyal advocate on your side. For more news and information on wealth management solutions, visit Caissa Wealth.