How the New Tax Laws May Change the Way You Donate to Charity
When the 2018 Tax Law went into effect, personal exemptions were increased to $12,000 for a single tax filer and $24,000 for married, joint filers. Many taxpayers will no longer have enough in itemized deductions to surpass this threshold. One deduction that is sure to be affected is charitable donations. One possible solution? Bunching charitable donations to every other year to overcome the threshold. Using donor-advised funds for charitable donations can help time the dispersal of funds to charities more frequently than every other year or whatever timeframe one is using. Donor-advised funds also offer tax advantages to those who own individual stocks. When stocks are transferred to the donor-advised fund, they are given at current value and no capital gains are recognized. Whereas, if the stocks were sold and then the resulting cash is donated, capital gains could be owed on the stock sale. A recent article, “Tax Planning: Using Donor-Advised Funds for Charitable Donations,” reviews the advantages of using donor-advised funds. While individual low cost stocks are best for charitable donations, mutual funds and ETFs can also be used. Another tax benefit for retirees is required minimum distributions may be transferred to a donor-advised fund via a qualified charitable distribution for a tax-free transfer. At Tradition, we can review your investments and provide a tax-efficient solution to your giving needs.
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