Maximize your tax benefits for charitable gifts

While giving gifts to charity is usually a reward on its own, donors could often also expect to get a tax deduction. Because of recent tax law changes, that may not be the case this year, unless you take some extra planning steps.

Tax breaks for donating still exist

As before, charitable deductions are only available when you itemize your tax deductions (as opposed to claiming the standard deduction). However, even if you itemized in the past, you may decide not to under current law.

Certain itemized deductions have been reduced or eliminated, while the standard deduction has essentially been doubled to $12,000 for single filers and $24,000 for married joint filers. This means you could donate $10,000 to charity this year without realizing a charitable deduction, if you don’t have other itemizable deductions. The changes are effective for 2018 through 2025.

But don’t give up on donation tax benefits just yet. Depending on your situation, you might boost charitable donations to the point where you will still itemize deductions. Consider these ideas:

  • Give away appreciated property. If you’ve owned the property longer than a year, you can deduct its full current value — instead of your cost — without ever paying any tax on the appreciation.
  • Use a donor-advised fund (DAF). With a DAF, you designate charities that will receive contributions from a general pool. You can deduct your lump-sum donation immediately even though money may be paid out to charities over time.
  • Bunch your donations in years you expect to itemize deductions. Cut back or skip contributions in some years so you can double your donation amounts for other years.
  • Roll over funds from an IRA. If you’re age 70½ or older, you can transfer up to $100,000 directly from an IRA without any tax consequences. You get no tax deduction, but the distribution isn’t taxable either. The payout counts as a required minimum distribution (RMD). In other words, you had to take an RMD anyway, so you may as well give it to charity.