Charitable Giving and Tax Considerations for Year-End | SJS Investment Services

Charitable Giving and Tax Considerations for Year-End

November 20, 2018

As the year winds down and we get ready to close the book on 2018, there are still many things to be done. Dinners to prepare, holiday gifts to buy, wish lists to fulfill.

In the hustle and bustle of the holiday season, there are even some things that can be done with respect to your investments.

As you likely know, there is a new tax law in effect this year – officially known as the Tax Cuts and Jobs Act – that went into effect on January 1, 2018. This new law changes some of the rules pertaining to charitable giving. In our conversations with you, this topic has come up with more frequency.

The new law doesn’t change the basic rules for charitable deductions (other than increasing the deduction limit for cash contributions from 50% to 60% of your adjusted gross income). But because the law nearly doubled the standard deduction (to $12,000 for single filers and $24,000 for married filers), fewer people will benefit from itemizing deductions.

So what can you do to still fulfill your charitable intent, while also making tax-smart decisions?

  • Consider gifting stocks, bonds or mutual funds with a tax gain to charity in lieu of a cash donation. If you donate the securities directly to the charity, you do not pay tax on the gain, and because you do not owe tax on the security sale, you may be able to give a larger gift. We can help you facilitate your year-end gifting, subject to custodian deadlines.
  • If your tax preparer determines that your deductions may no longer exceed the standard deduction amount, there may be a benefit to bundling your charitable donations.  By adjusting the timing of donations to fall within a given calendar year, you might be able to increase your total deductions over the standard deduction, and see a potential tax benefit.
  • The rules for qualified charitable distributions still remain, allowing people older than 70 1/2 to transfer up to $100,000 from their IRAs to charity each year, and have it count as their required minimum distribution (RMD) without being added to their adjusted gross income. The tax-free RMD from an IRA may be of greater benefit to those who can no longer itemize. Your charitable gift isn’t included in your adjusted gross income, and therefore isn’t taxed. We can help with any final distributions yet to be made.
As always, we’re happy to work with you, and your tax professional, to get things done in a way that makes sense for you. Please contact us if you have questions!


SJS Investment Services does not provide tax advice. Please consult your tax professional for specific advice. This material has been prepared for informational purposes only.