on July 23, 2019
With new tax guidelines related to charitable giving, it is difficult to know how to proceed. Now, the average donor is put in a tricky position: continue giving as usual, with the understanding that you may not see any tax benefits? Reduce your donations? Or, reform your giving so you’re just as generous and taking advantage of tax write-offs? It is possible to choose the last option—all it takes is a little planning.
The 2018 tax reform made many major changes, some good, some not so good. One of the more controversial pieces was the overhaul of charitable giving deductions. In the past, anyone could deduct the financial gifts they made to a qualified nonprofit organization (no matter the amount). However, the new legislation mandates that individuals must give $12,000 in a given year ($24,000 for couples) before qualifying for a deduction. This essentially excludes the average donor from receiving any benefits, and prioritizes major donors.
The result? Grassroots organizations have taken a hit. Charitable giving is down, and many nonprofits are struggling to figure out what to do about it. Was this the intention of the reform? It’s hard to say, but that, unfortunately, has been the effect. So, how can you work the new system? What giving strategies can an average donor use?
One method is to set aside charitable giving money in a high-interest savings account or CD. Every year (or every month or quarter), add a designated amount of money to the account—the amount you would typically give to charitable organizations. Once the account has reached $12,000 ($24,000 for couples), dole out the entire sum within a calendar year.
Keep in mind, some non-monetary donations count toward your annual giving total. The rules are complex, so be sure to speak with a tax accountant before you act.
Another thing to keep in mind: With the new tax reform in place, you may receive a larger return than in years past. Consider rolling some of that money over to your favorite charity.
Don’t let the new tax reform stop you from being the giving, caring person that you are! Even if you decide to decrease your monetary contributions this year, you can still donate your time. Many nonprofit organizations rely on volunteers to help with their daily operations. From planting trees to walking dogs at animal shelters to organizing food boxes at your local food shelf, there’s plenty you can give besides your dollars.
Additionally, you might consider giving without any thought of reward or return. As John F. Kennedy once said, “Philanthropy, charity, giving voluntarily and freely… call it what you like, but it is truly a jewel of an American.”