Margo's Money Management, Money Mondays, Uncategorized

Money Mondays: Charitable Giving in our New Tax World

If you are charitably-inclined, this message is for you.

There has been a lot of discussion about the new tax laws and how they will affect charitable giving since the standard deduction for both an individual and a married couple has reached historically high levels.  ($12,000 for single-filers, $24,000 for married filing joint)

Your CPA is the authority, but it’s very likely that you may be, for the first time in a long time, taking the new standard deduction for the 2018 tax year.  If you take the standard deduction, and if you write a check from your checking account to make a donation or give by credit card, you cannot take a tax deduction for those gifts this year!  It’s very possible that, even if you itemized deductions for 2017 and took those charitable deductions, you will not be itemizing this year and won’t get a charitable deduction for donations to non-profit organizations.

I have tips for consideration today on how you can still give tax-efficiently in this new environment.  Regardless of the amount of the donations you are making, there are some important insights to share.

Best ways to give to charities NOW: If you are still writing a check from your checking account or giving by a swipe of your credit card, please pause before giving this way this year. There is are more tax-efficient ways to give while in the new tax environment where you will still save money and the charity of your choice will get the same amount of money.

  • Have a brokerage account? Transfer appreciated securities from it to the charity directly: This is way easier than you think.  You would make a transfer of appreciated securities (like stock) to the charity of your choice, and as a result, avoid capital gains taxes on these securities.  So, even though you might not take a charitable deduction on your taxes for 2018 if you are using the standard deduction, you will still save money on would-be capital gains for these appreciated securities.  Then, deposit the cash you would have given from your checking account into your brokerage account and invest it to replenish that money.
  • If you are at least age 70.5, utilize the Charitable RMD Rollover: If you are at least age 70.5, you are required to take a distribution (called RMD) from your retirement accounts like your Traditional IRA or former 401(K)/403(B). Tax laws allow you to roll some or all (up to $100k per year) of this RMD directly to a charity, and as such, it is not included in your taxable income for the year!  This is very beneficial from a tax perspective.  To make this even easier, some banks/custodians (like Charles Schwab) have introduced a Charitable Check Book.  This means that you can write checks directly to a charity from your IRA.  It’s easier than ever.

Best ways to give cash LATER:  If you are considering what’s called a planned gift to your favorite organization by including them in your estate plans, it’s very possible that the most tax-efficient way to give this gift will be from your retirement plan, like your Traditional IRA or former 401(K)/403(B).  These accounts can be taxed heavily when transferred after death to a loved one.  The better assets to gift loved ones in your estate plans are cash, real estate, Roth IRAs, or other items.  You can easily include the charity as a charitable beneficiary (or even alternate charitable beneficiary) of your retirement account.

Don’t STOP giving, please.  Now more than ever, it’s important to support the causes in your community and beyond that you are passionate about.

Obviously, you don’t give for the tax deduction.  However, if there are ways to give that also save you money, I want to make sure you know about them.

With gratitude,

Margo

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