- Standard Deduction
Charitable donations are generally income tax deductible, and often reduce the income taxes owed for taxpayers who itemize their deductions, rather than take the Standard Deduction. The increase in the Standard Deduction reduces the number of taxpayers who itemize their deductions, which experts believe will reduce charitable donations. The charitable donation deduction can still be used for taxpayers itemizing their deductions.
Under the new tax law, the Standard Deduction increased to $12,000 for a single filer, $24,000 for those Married filing jointly, and $18,000 for Head of Household filers. The Wall Street Journal estimates a 50% decrease in the number of tax returns that will file with itemized deductions. Continuing your donations to favorite charities will continue to improve our communities and our world.
Donors who have flexibility when they make donations could consider donating in alternate years so that one year you take the standard deduction and in the year of the donation you take itemized deductions. Be sure to let the charity know that your larger donation is for two years.
- Giving Appreciated Stocks
Experts say donating appreciated stocks or bonds may be a win-win situation for both you and your favorite charity. In this scenario, securities are transferred to the charities’ brokerage account, and you receive a tax deduction receipt for the value of the stock on the day it is transferred. The benefit to you is there are no capital gains taxes regardless if you itemize or not. Depending on the value of the stock, the donation may also push you over the threshold to be able to claim itemized deductions depending on those other three categories of Taxes, Health Expenses and Mortgage Interest. If your charity can’t accept stocks or bonds, work with your advisor to consider whether a Donor Advised Fund might be used to give to the charity.
- Qualified Charitable Distributions from Retirement Accounts
When taxpayers are required to take minimum distributions from their retirement accounts, usually after age 70 ½ years, they may make a distribution directly from their account to a qualified charity. This reduces the amount taxpayers must take in required minimum distributions, which are subject to income tax. While this doesn’t help those with itemized deductions, it can benefit the calculation of Medicare premiums which are based on the Adjusted Gross Income of the tax filer. Working directly with your advisor or retirement plan administrator can help you consider making charitable donations from your retirement accounts.
As always, CSPA’s board of directors appreciates the financial support we receive from our donors and we know that together we can continue to improve the California State Parks on the San Mateo County coast. Thank you for your support.
Disclaimer: This information is in no way intended to be tax, investment, financial planning or legal advice. You are strongly encouraged to consult with your personal advisers.