As the first major giving season following last year’s Tax Cuts and Jobs Act approaches, most donors plan to maintain or increase charitable contributions in 2018, WealthManagement.com writes. However, it seems that many don’t understand the impact of the tax code changes on their donations, according to the publication.
Strategies to Make the Most of Charitable Giving in 2018
A recent survey by Fidelity Charitable found that many donors are unaware of how to retain expected tax deductions, WealthManagement.com writes. The increased standard deduction — $12,000 for individuals, $24,000 for those filing jointly — means that itemizing might not be the best option, but 58% of donors still plan on doing so, according to the survey, the publication writes. This could prove to be a mistake, since things clients once itemized may not add up to exceed the standard deduction thresholds, according to WealthManagement.com.
An alternative strategy for potential donors is bunching, or stacking, by which clients roll multiple years of tax deductions into one year to surpass the standard deduction threshold, the publication writes. One way to do this is by using a donor-advised fund, whereby clients pre-fund the vehicle with a set number of years worth of charitable deductions, which are then distributed annually, according to Paul M. Roy, of counsel at Wither, the publication writes. The flexibility of DAFs could make them a good option as they accept various assets such as cash, securities and bitcoin, Roy tells WealthManagement.com.
Currently, the major problem is that clients are waiting until the final weeks of the year to make donations, which doesn’t give advisors time to educate them on post-tax reform strategies, the publication writes. Therefore, advisors should reach out to clients with guidance on charitable deductions, according to WealthManagement.com.