Tax savings from charitable donations still possible?

Currently, there is a lot going on in the philanthropic sector right now. A Wide range of transformations to U.S. laws are about to impact whether American taxpayers benefit from charitable giving – but there are still ways to extract the goodwill from making philanthropic acts.Charitable contribution deductions for United States Federal Income Tax purposes are defined in section 170(c) of the Internal Revenue Code as contributions to or for the use of certain nonprofit enterprises. While it remains effective under the current Tax Cuts and Jobs Act, a smaller number of Americans are still expected to benefit from the charitable-donation deduction. The tax law geared up the standard deduction by nearly double for both individuals and married couples, which is expected to result in fewer people capitalizing.

Tax Policy Center estimates that the number of people who claim the deduction for the charitable give away is expected to come down to $16 billion in 2019, from previous years $37 billion. That’s more than $20 billion reductions!

However, even if you won’t be able to capitalize this tax season, there are still ways you may be able to deduct charitable donations. One such strategy is known as “bunching.” Under this strategy, an individual could take the standard deduction in 2018, and then pile a bunch of 2018 and 2020 expenses to come up with $30,000 worth of itemized deductions in the following year.

Other payments that could work using a bunching strategy are medical and mortgage payments. According to Fidelity Investments, only 30 percent of itemizers have heard of bunching.

Another way taxpayers can benefit from making donations is through a donor-advised fund, through which taxpayers have the option of stashing as many years’ worth of charitable donations as they can at one time. Those funds can then be given away at the investors’ leisure, but taxpayers will reap the benefits from the charitable deduction up front. There are multiple benefits to a donor-advised fund under the new tax code, which include potentially avoiding the capital gains tax and taking advantage of the charitable deduction.

Charities have received less money so far this year from fewer donors, a trend that could be exacerbated in the fourth quarter due to changes made to the U.S. tax code. According to a recent study from the Association of Fundraising Professionals, the number of donors declined 6.6 percent in the second quarter of 2018 when compared with the previous year. The donor retention rate, or the number of donors who planned to give to the same organization, declined 6.4 percent during the same time period.

Overall revenue has declined so far this year when compared with 2017, as have $1,000-plus gifts and gifts under $250. This might be a good time to consult a professional If you are unsure how to benefit from your charitable contributions under the new tax code.

However, even if you won’t be able to capitalize this tax season, there are still ways you may be able to deduct charitable donations. One such strategy is known as “bunching.” Under this strategy, an individual could take the standard deduction in 2018, and then pile a bunch of 2018 and 2020 expenses to come up with $30,000 worth of itemized deductions in the following year.

Other payments that could work using a bunching strategy are medical and mortgage payments.According to Fidelity Investments, only 30 percent of itemizers have heard of bunching.

Another way taxpayers can benefit from making donations is through a donor-advised fund, through which taxpayers have the option of stashing as many years’ worth of charitable donations as they can at one time. Those funds can then be given away at the investors’ leisure, but taxpayers will reap the benefits from the charitable deduction up front. There are multiple benefits to a donor-advised fund under the new tax code, which include potentially avoiding the capital gains tax and taking advantage of the charitable deduction.

Charities have received less money so far this year from fewer donors, a trend that could be exacerbated in the fourth quarter due to changes made to the U.S. tax code. According to a recent study from the Association of Fundraising Professionals, the number of donors declined 6.6 percent in the second quarter of 2018 when compared with the previous year. The donor retention rate, or the number of donors who planned to give to the same organization, declined 6.4 percent during the same time period.

Overall revenue has declined so far this year when compared with 2017, as have $1,000-plus gifts and gifts under $250. This might be a good time to consult a professional If you are unsure how to benefit from your charitable contributions under the new tax code.