Tax Deductions for Charitable

Tax Deduction for Charitable Donations

As a result of the overhaul, the number of tax returns claiming deductions for charitable contributions is expected to fall by more than 50%. For 2018, approximately 15 million filers will take this write-off, compared to approximately 36 million for 2017. The standard 2018 deduction is almost double the 2017 level, rising from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for couples filing together. It rises to $12,200 for individuals and $24,400 for couples for 2019. The standard deduction is the amount filers can exclude from income if they do not list “itemized” write-offs for mortgage interest, charitable donations, state taxes and the like on Schedule A. As a result, a filer’s itemized 2018 deductions will have to be higher than new standard deductions for the filer to benefit from itemizing. Say Anna and her husband, John, donate $10,000 annually to charities, but their mortgage is paid off and their only itemized deduction is $10,000 in state and local taxes, for a total of $20,000. This couple set out deductions for tax year 2017 on Schedule A because the total of $20,000 exceeded their standard deduction of $12,700. But they will opt for the standard $24,000 deduction for tax year 2018 as it exceeds the total of $20,000 on Schedule A.

There are ways around this change for charitable donors wanting a tax break. One is every couple of years to “bunch” donations to overcome the higher standard deduction. If Anna and John donate $20,000 each other year, in those years they could itemize and claim the standard deduction in the years they don’t donate. Also, donor-advised funds should be considered by givers. These popular accounts allow donors to bundle smaller gifts into one large amount and take a gift year deduction. Afterwards, the donor may designate charities as recipients. Meanwhile, although the accounts have fees, it is possible to invest the assets and grow tax-free. Donors who are 70 1⁄2 or older, if they have individual accounts, have another good strategy. Many can benefit from contributing directly to one or more charities up to $100,000 of IRA assets.