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Charitable Giving: What you need to know before you give

James E. Brennan, CFP

Charitable Giving

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)

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

We 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, we have 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 stop! There is a more tax-efficient way 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.

  • Transfer appreciated securities from your brokerage account: Talk with us about how to do this – it’s easy.  You would make a transfer of appreciated securities to the charity of your choice and you would 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.
  • If you are at least age 70.5, utilize the Charitable RMD Rollover: As you know, if you are at least 70.5, you are required to take a distribution 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, something very exciting has now happened: Schwab has introduced a Schwab Charitable Check Book.  This means that you can write checks directly to a charity from your IRA.  It’s easier than ever.  Contact us to get more information on how to order these checks.

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, and we’re here to help you do it if you have interest. 

As your advisory team, we are here to help!  Call us to discuss this further at any time.  Wishing you a happy, safe and fun summer!  It will be here before we know it!

All the best,

Jim, Margo, Mary Lu, Laurie, Samantha, & Kate