Changes to the tax law in 2018 have taken away most people’s ability to deduct charitable contributions. But there are still a few options to consider in order to give and still receive.
Fortunately, there are options for donors who would like to obtain a tax benefit for their generosity. One permits anyone 70½ or older to make a direct transfer of IRA balances up to $100,000 per year to a charity. For most donors, these qualified charitable distributions (QCDs) make it possible to net an ever-greater tax benefit because those dollars will never hit your adjusted gross income (AGI). Because you would have paid income taxes on that distribution, this strategy offers significant benefit to those who would have given that amount regardless. Added bonus: QCDs go toward satisfying your required minimum distribution (RMD). Bear in mind, though, that QCDs must come from IRAs; they cannot come from 401(k)s.
Another option, charitable stacking or lumping, is quickly emerging within different circles as the charitable strategy of the future. It’s not complicated. Instead of giving $10,000 per year over five years to a charity, you would give $50,000 in one year, taking you above the new $24,000 standard deduction and thus providing a tax benefit for your contribution.
It doesn’t matter what or how a person does something. What really matters is why they do what they do. The why is tied to emotions, while the what and how are tied to logic. Think about why you give to the nonprofits on your list. Of course, you may enjoy a tax benefit for donating, but it is not the reason why you do it.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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