With the increased standard deduction starting with tax year 2018, claiming a deduction for charitable contributions has been more challenging. If you are charitably inclined to donate to 501(c)(3) organizations, there are different options for the best tax benefit.
- Donor Advised Funds – this allows for an upfront charitable tax deduction, with an account to use in the future for funding your favorite charities.
- Qualified Charitable Distribution (QCD) – sending pre-tax IRA funds directly to charities allows for the distribution from the IRA to be tax-free.This option is for those taxpayers 70 ½ or older and can help to satisfy your Required Minimum Distribution.
- Donation of Appreciated Stock – Donation of stocks with a built-in capital gain allows for a charitable deduction at the stock’s fair market value on the date of the donation, plus the taxpayer bypasses any capital gain recognition.These stocks can be donated directly to charity (if they can accept them) or through a Donor Advised Fund mentioned above.
- Bunching of donations – if you plan on making substantial donations over two years to a charity, it may make sense to “bunch” the amounts together into one tax year to assist with getting over the standard deduction or use “bunching” in conjunction with the Donor Advised Fund mentioned above.
The article below touches on some of these options. Please get in touch with your tax advisor if you have questions or want to discuss how these options may work in your tax planning.
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