Boost Charitable Giving Despite Trump's Tax Law Changes

The Tax Cuts and Jobs Act (TCJA) of 2017 brought significant changes to the U.S. tax code, influencing taxpayers behavior across a spectrum of financial activities, including charitable giving. While the legislation doubled the standard deduction and adjusted itemized deductions, many householders emerged to query if their benevolence would yield lesser tax benefits. Despite these alterations, charitable contributions remain a vital social pillar, fostering community growth and supporting numerous causes. Heres why and how you can continue, or even augment, giving charitably while navigating the new tax landscape.

Understand the Current Tax Landscape

Before diving into strategies to optimize charitable giving, it's essential to grasp the changes introduced by the TCJA:

• Standard Deduction Increase: The TCJA almost doubled the standard deduction, which for 2021 stands at $12,550 for single filers and $25,100 for married couples filing jointly. This means fewer taxpayers are itemizing their deductions, which traditionally included charitable donations.
• Limit on SALT Deductions: State and local tax (SALT) deductions are now capped at $10,000. This cap affects taxpayers in high-tax states who formerly relied on these deductions to itemize other expenses.
• Increased AGI Limit for Cash Donations: The TCJA increased the limit for cash contributions to public charities from 50% to 60% of adjusted gross income (AGI), providing greater tax relief for significant cash gifts.

Boosting Charitable Giving: Key Strategies

Despite the TCJA changes, there are a variety of ways to maximize the impact and benefits of your charitable contributions:

• Bunching Donations: Instead of spreading your charitable contributions evenly each year, consider "bunching" your donations into one year to exceed the standard deduction threshold. This approach allows you to itemize in the "bunching" year and take the standard deduction in other years.
• Donor-Advised Funds: Establishing a donor-advised fund (DAF) permits donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time. This strategy provides more flexibility around timing and concentration of donation amounts.
• Qualified Charitable Distributions: For individuals aged 70 or older, making a Qualified Charitable Distribution (QCD) directly from an IRA to a charity can satisfy required minimum distributions (RMDs) without adding to taxable income. QCDs also don't require itemization to benefit from the donation.
• Donating Appreciated Assets: Instead of cash donations, consider donating appreciated stocks or other assets. Donating these assets allows you to avoid paying capital gains tax and still deduct the full market value of the asset, if you itemize.
• Utilize Tax-Free Treatment: Capitalize on opportunities for tax-free treatments, such as the CARES Act of 2020 provision allowing a $300 above-the-line deduction for charitable contributions a benefit available to those taking the standard deduction.

Final Thoughts on Smart Charitable Giving

Charitable giving, often seen through the lens of tax efficiency, should also be motivated by the fundamental goal of making a positive impact. While tax benefits provide a solid incentive, the primary drive should be the transformational change your contributions can make within your communities and supported causes. By incorporating the strategies outlined above, you can ensure that your charitable giving remains impactful, fulfilling, and tax-efficient despite the challenges set forth by recent tax reforms.

If you're looking to explore more ways to save on taxes and further optimize your charitable giving strategy, we encourage you to setup a call with our team. Our experts will guide you on the best financial strategies personalized to your situation to maximize your charitable impact and tax savings.