What the new tax rules mean for charitable donations

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Raleigh, NC – With the giving season in full-swing, some charities are worried about negative impacts from the Tax Cuts and Jobs Act. In previous years, tax deductions incentivized Americans to donate to charity. That motivation fueled millions of dollars in donations to organizations across the country. However, in 2019 the standard deduction will be $12,000 for single individuals ($24,000 for couples), almost twice what it was before.

Financial advisors say that spike means itemized deductions will no longer be the fiscally-responsible choice for many filers. So what does that mean for charities? Surely, some Americans will continue to donate out of the goodness of their hearts – but will that be enough? Luckily, it might not have to be.

According to nclawyersweekly.com, there are other ways donors can use contributions to their advantage.

Frontloading, or “bunching”, contributions can help filers meet the itemized requirement. For example, if you make two years’ worth of donations in a single year, you’ll be much closer to meeting the standard deduction amount. However, that doesn’t completely solve the problem for charities. Chances people aren’t going to jump at the idea of doubling their annual contributions, which could lead to people making a big donation one year, then not donating at all the next year.

Another way to deal with the higher standard deduction is to ask your financial advisor about setting up a donor-advised fund, an account that is composed of your contributions. Once the donor makes the contribution they will receive an immediate tax benefit and the organization will take over legal control of the account. Filers will maintain the ability to distribute funds and the investment of assets in the account.

While the overall impact of the new tax laws will have on charities remains to be seen, it’s worth mentioning that no major organizations have reported a sharp decline in donations as a direct result of the Tax Cuts and Jobs Act.

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