Giving Guide by Lorelei: Tax-Saving Tips for Philanthropy

By Lorelei Costa

Note: This article first appeared in the November 14, 2018 edition of the Outer Banks Sentinel.


‘Tis the season to be giving! Yup, it’s that time of year. As the holidays approach, many of us reflect back on our calendars—and our checkbooks—and begin to choose the charities that will receive our year-end largesse.

While you’re reviewing your finances, this is a great time to make sure your philanthropy is structured to take the best advantage of the new provisions in the new tax bill. It may well be that you can get a greater tax benefit by shifting your giving strategy just a bit.

To be clear: you can still deduct your 2018 charitable donations! However, the new tax law has essentially doubled the standard deduction for most Americans, and therefore some tax-payers will find greater advantage in choosing the standard deduction, rather than itemizing cash donations and other typical deductions.

For example, maybe you don’t have a lot of mortgage interest to deduct. Your best strategy may be the standard deduction. If that’s your situation, there are still several smart giving strategies that may help your tax bill—and, of course, help your community.

Whether you itemize or not, consider whether these tactics will help your bottom line.

IRA Rollover Contributions: If you are age 70½ or older, your best strategy may be to donate to your favorite charities directly from your IRA, rather than from your checking account. Whether you itemize or not, if you donate directly from your IRA to charity, the money is never added to your income, yielding a much better bottom line on your tax return. Also, donations from your IRA count toward your required minimum distribution, which is fantastic if you don’t need your IRA for income right now, but are forced to take a distribution anyway because of your age. Remember, for this strategy to work, your IRA has to write the check directly to your charity.

Gifts of Stock: Gifts of cash are not always your most tax-advantaged strategy. If you happen to own securities outside of a retirement account, ask your financial advisor whether donating your appreciated stock would benefit you more than writing a check to charity. Donating your appreciated assets may help you avoid the capital gains tax, which is helpful whether you itemize or not.

Gift Bundling: Perhaps you contribute annually to charity, and perhaps your budget is somewhat flexible. Consider bundling the donations you might have made over two or more years into one year.

Take, for example, a married couple that gives $10,000 to charity each December, and has about $10,000 in mortgage interest and other potential deductions. If they give their usual $10,000 in December 2018, they might not benefit from itemizing in 2018 (because the standard deduction is now $24,000 for married couples).

But what if they gave that gift just a few weeks later, in January 2019, instead, and also gave again in December 2019, as per usual? By making two years’ worth of gifts in 2019, they can take the standard deduction of $24,000 in 2018, and itemize $30,000 in 2019—a much greater benefit over two years. If you have some flexibility in your budget, ask your accountant if this strategy would help you.

As always, the Outer Banks Community Foundation is your local resource for legacy philanthropy. Whether you wish to create a scholarship, endow your favorite nonprofit, help your community with a planned gift, start a grant-making endowment, or establish a family legacy fund, we are here to facilitate your giving. Call us at 252-261-8839 to learn more.