In Elder Law News, General Estate Planning

The new tax law and charitable giving for the holidays

With a gift-giving season upon us, we are already seeing longer lines at stores, traffic on the roads, and disheveled displays that used to hold boxes of the coolest new toys and gadgets for this year. Instead of standing in long lines this holiday season, consider giving a gift you don’t have to battle the crowds for.

Making a donation to a non-profit organization in someone’s name is a great way to spread cheer this holiday. In addition to making you feel good, you may also receive a tax deduction for your gift, depending on the charity you choose.

However, the new tax law makes it harder to claim a tax deduction for charitable contributions. While charitable giving should not be only about getting a tax break, if you want to get a tax benefit from your contributions, there are a couple of options.

The Tax Cut and Jobs Act, enacted in December 2017, nearly doubled the standard deduction to $12,000 for individuals and $24,000 for couples. This means that if your charitable contributions along with any other itemized deductions are less than $12,000 a year, the standard deduction will lower your tax bill more than itemizing your deductions. For most people, the standard deduction will be the better option.

If you still want to maximize the tax benefits of charitable giving and you have the financial means, one option is to double your charitable donations in one year and then skip the donation the following year. For example, instead of giving $10,000 a year to charity, you could give $20,000 every other year and itemize your deductions in that year.

Another way to concentrate charitable giving is to establish a donor-advised fund (DAF) through a public charity. A DAF allows you to make a charitable donation to the fund and receive the tax benefit immediately. The money is placed in an account where it can be invested and grow tax-free. You can then make donations to charities from the account at any time, in addition to adding to the account. As with any investment, you need to do research before establishing a DAF. Make sure you understand the fees involved and whether there are any limits on the charitable contributions you can make. You should consult with your financial advisor before taking any steps.

If you are taking required minimum distributions from an IRA, another option is to donate those distributions directly to charity through a qualified charitable donation. The distributions won’t be included in your gross income, which means lower taxes overall. The donation must be made directly from the IRA to the charity and different IRAs have different rules about how to make the distributions.

Finally, we wanted to highlight a few of our favorite nonprofits in the area. Our staff picked the organizations in the Capitol City area that are nearest and dearest to their hearts.

  • Alzheimer’s Services of the Capital Area teaches, cares for and connects with those in our community affected by Alzheimer’s disease and other memory-related impairments
  • Dialogue on Race Louisiana dedicated to the elimination of racism through education, action, and transformation
  • Rebuilding Together Baton Rouge aims to bring together volunteers and communities to improve the homes and lives of low-income elderly and low-income disabled homeowners, allowing them to remain in their homes as long as possible
  • Arc of East Ascension aims to enhance the quality of life for persons with disabilities and their families through services and advocacy that support choice, independence, and dignity
  • Ascension Council on Aging directly provides or coordinates the full range of services available through State and Federal Agencies to the elderly

For more information on how to maximize your charitable giving under the new tax law, consult with a qualified estate planning attorney to help you look at your options and decide the best plan of action for you. May your holiday be merry and bright this year!

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