Tax-Wise Year-End Giving
What’s New and What’s Not for 2018 Donation Considerations
November 28, 2018
By Bill Zook, Senior Advisor, Gift Planning
In late 2017, no one knew how tax laws governing charitable giving would change. We just knew they would. Perhaps unsurprisingly, change came at the eleventh hour.
Here in late 2018, there’s little to no likelihood that the Internal Revenue Code will be modified in any relevant way between now and December 31. Thus, the major thing that’s new this year is certainty about what the rules are.
Still, because some rules have been revised and some have not, it’s wise to review where things stand and consider your options before making plans.
New for 2018
The threshold determination every donor must make is whether it will be possible to itemize deductions this year. Fortunately, the tax deductions associated with charitable gifts were preserved and, at least in one respect, enhanced: contributions of cash can now be deducted up to a limit of 60 percent of adjusted gross income. Nevertheless, charitable deductions – either on their own or combined with other itemized deductions – must exceed the standard deduction to produce any benefit.
Accordingly, some donors have begun to think about “bunching” their charitable giving if they are unlikely to exceed the standard deduction every year. The basic idea is to make two years’ worth of charitable contributions every other year. That means they would itemize deductions in the “giving year” and take the standard deduction in the following year.
Of course, with a donor advised fund, giving can be bunched. A single contribution every other year, combined with annual grant requests, can ensure ongoing cash flow for favorite organizations.
Options That Remain Appealing
Long-term appreciated capital assets continue to be a great choice for use in charitable giving. When they are transferred directly instead of being sold, they are deductible at their full value and completely avoid capital gains tax. While many donors contribute publicly-traded securities, real estate and closely-held business interests can also be appropriate. You should build in as much lead time as possible for giving these kinds of assets.
If you are over age 70 1/2 and have a traditional IRA, the law allows you to transfer up to $100,000 a year directly from the IRA to an organization such as Seattle Foundation without any increase to taxable income. Your gift is not tax deductible but can be used to satisfy your required minimum distribution, if you haven’t already taken it for the year. Note: Such “charitable rollover” gifts can be contributed to any type of Seattle Foundation fund except a donor advised fund.
Once you have an idea of how you might like to proceed, be sure to consult your professional advisors. In addition, Seattle Foundation can work with you and your advisors at no cost to help identify effective ways to have the charitable impact you desire in 2018 and beyond. To learn more, contact Bill Zook at firstname.lastname@example.org or Allison Parker at email@example.com.