Changes to Standard Deductions Shouldn’t Impact Your Charitable Side
New tax laws introduced in 2018 are making it more challenging to reap a reward from charitable giving. Although Americans are extremely generous, there is growing concern among charitable organizations is that those who can’t exceed the new standard deduction with a charitable donation, will avoid giving altogether.
In a nutshell, the standard deductions for individuals and married persons has almost doubled. Under the legislation, an individual would need total itemized deductions in excess of $12,000, up from the previous deduction level of $6,350. Married couples would need deductions exceeding $24,000, up from $12,700. With this higher standard deduction, it will be harder for people to claima tax benefit from smaller charitable gifts.
Michigan Residents Can Approach Charitable Giving Differently
While we recognize and applaud those who donate, despite the tax benefits, there are strategies you can take that help ensure your charitable contributions, of money or property made to qualified organizations, are still an important part of your tax strategy. Here are some considerations to discuss with our E&Y tax experts for this year and next.
Bundling or “Bunching” Donations: Consider increasing your contribution every other year, so you are accelerating your giving to exceed that standard deduction. For example, instead of giving $5,000 to charity annually, give $10,000 every two years; this way, your itemized deductions will climb over the limit one year and you can simply take the standard deduction the next. It’s a win-win for you and the charitable organizations of choice.
Donor Advised Funds (DAFs):
DAFs are an interesting option for Michigan-residents. A donor-advised fund is a charitable giving vehicle established with, or sponsored by, a public charity. You can create a donor fund with a contribution to that charity and receive immediate and maximum tax benefits. You can also recommend grants over time to any IRS-qualified public charity.
Donate Items Instead of Money:
Consider looking at items of value that you can donate instead of cash. For example, you talk with your E&Y Tax team about how you can avoid capital gains tax on investments by giving stocks or other appreciated assets, such as artwork and antiques, which have grown in value, to a registered charitable organization.
Doing good should always go rewarded and our team of Michigan tax experts wants to help you stay charitable. Keep records and receipts from all your charitable donations – monetary or otherwise. You might need to do a little extra legwork to qualify for deductions in some cases; for example, you can’t deduct a contribution of more than $250 unless you have a written acknowledgment from the organization. Our team can let you know exactly what you need before it’s too late to itemize at all.
If you’re overwhelmed already, don’t be. Come in and talk with us about your taxes. Let us guide you toward a tax plan that makes sense. Let’s talk!
About E&Y Agency
E&Y Insurance Agents are dedicated to giving our clients insurance products that provide quality protection and value pricing. Our goal is to establish a successful partnership with our clients, our staff members, and our insurance companies. Our success is measured by our clients choosing us because they believe in our ability to meet or exceed their expectations of price, service, and expertise. Call us now to talk about your insurance needs! We are located at 888 W Big Beaver Rd #750
