The charitable contribution deduction was mostly untouched by the Tax Cuts and Jobs Act (TCJA) passed in December of 2017.
The two biggest changes were an increase in the limitation for cash donations to public charities from 50% to 60% of AGI, and donations to colleges in exchange for athletic event seating rights are no longer deductible. While the increase in the AGI limitation is advantageous for donors, the increased standard deduction has created a new barrier to receiving a meaningful charitable deduction for donations.
In light of these changes, taxpayers have a few options for maximizing the tax-efficiency of their donations:
· You may want to consider starting a donor-advised fund. These funds are agreements between a donor and an organization that allows the donor to advise the organization on how the donations will be invested and how distributions to charities will be made. Since contributions are deductible in the year they are made to the fund, taxpayers can bunch all of their planned future contributions into one year, allowing them to take a larger charitable deduction that could surpass the new higher standard deduction. Be sure to review the organization’s requirements before taking this route; some have minimum contribution or balance requirements.
· Donating appreciated property to charitable organizations allows you (and the charity) to avoid paying taxes on the associated gain. If you have owned the property for more than one year, you often will be able to deduct its full value.
· On the other hand, do not donate property that has depreciated in value. When you donate depreciated property, neither you nor the charity will be able to claim a loss on your tax returns
· If you are over 70 ½, consider making qualified charitable distributions (other restrictions do apply). These are donations that are made directly from your traditional IRA to a public charity and can count as your annual required minimum distribution (RMD). The distribution will not be included in your taxable income, so this is a great way to donate to charity and still receive a tax benefit despite the higher standard deductions.