Bunch Charitable Contributions through Donor-advised Funds: The new tax law increases the limit on cash contributions to public charities and certain private foundations from 50% to 60% of AGI.
That being said; the law also increased the standard deduction, in fact it almost doubled. The higher standard deduction along with the capping of the state and local tax deduction at $10,000 per year ($5,000 for a married taxpayer filing a separate return), changes to the home mortgage interest deduction, and the elimination of miscellaneous itemized deductions, it’s highly likely that fewer of us will be itemizing in 2018.
A great planning strategy to put into play in this situation is to bunch or increase charitable contributions in alternating years. This may be accomplished by donating to donor-advised funds. Donor-advised funds allow donors to make a charitable contribution to a specific public charity or community foundation that uses the assets to establish a separate fund. Taxpayers can claim the charitable tax deduction in the year they fund the donor-advised fund and schedule grants over the next two years or other multiyear periods. This strategy provides a tax deduction when the donor is at a higher marginal tax rate while actual payouts from the account can be deferred until later.
If you have questions or want more information on donor-advised funds, please contact John Csargo at firstname.lastname@example.org. We welcome the opportunity to help you put together a charitable giving plan that suits your goals.