Preserve Your Charitable Deduction with a Donor Advised Fund
The new federal tax law could affect your charitable giving. Deductions for charitable gifts will not change in 2018, but other changes to federal tax law could affect whether you will itemize your taxes for future years – and that could affect the deductibility of your charitable donations in 2018 and beyond.
Under the new law, the standard deduction – the amount taxpayers can subtract from their taxable income without itemizing deductions on their tax returns – will rise to $12,000 for individuals and $24,000 for married couples. That means people whose itemized deductions would be below the cutoff may no longer see tax savings from their charitable giving.
A donor advised fund with the Jewish Community Foundation can preserve the charitable deduction for people who otherwise would not itemize. Donors can “bunch” two or more years’ worth of charitable giving into a donor advised fund, take the tax deduction in the year of the gift, and then make charitable gifts from their donor advised fund over time. With this strategy, the funds you donate this year can be contributed to the organizations you support next year and beyond. Plus, the money you donate to a donor advised fund is invested, potentially increasing the amount available for contributions.
If you contribute to your fund by transferring appreciated stock, you can get a deduction for the full current value of the stock and avoid capital gains at the same time. For many people, this is a particularly tax-effective way to give, because of the significant stock gains they have enjoyed in recent years.
Consult a tax professional
Depending on your situation, we recommend that you consult a tax professional about giving a few years’ worth of donations now to ensure that you get a tax deduction for your generosity, or donate more next year into your donor advised fund.