Giving charitably can generate a wonderful feeling that feeling that you personally made the world a better place by supporting a cause you’re passionate about. In addition, you also receive a tax benefit by way of a deduction on your tax return for the dollars you give.
The 2018 tax law threatened those deductions, almost causing panic for non-profit organizations throughout the United States. Charitable giving can be an important aspect of a tax and estate plan, so these changes to the tax code had advisors and clients rethinking the most optimal approach to maximize both the dollars gifted and taxes saved.
Prior to 2018, the standard deduction amount was $12,700 for a married couple and $6,350 for a single taxpayer. The new tax law increased these amount to $24,000 for married couples and $12,000 for singles. Why is this important? Charitable donations are an itemized deduction, meaning they are combined with other itemized deductions, such as home mortgage interest and medical expenses, to determine if taxpayers should take the standard deduction or itemize. People filing taxes take the greater of the standard or itemized deduction, so the higher standard deduction amount caused concern that fewer people would be incentivized to give to charity.
The new tax law disrupted the landscape of the philanthropic perspective because it got a lot harder to surpass the standard deduction limit. Taxpayers itemizing their deductions fell more than 40%, along with charitable giving, according to the Tax Policy Center, showing that taxpayers may not be giving solely because of the tax deduction but are less likely to give without it. With the standard deduction in 2019 going up again to $24,400, there are still a few options out there to give to the charity of your choice, while still collecting tax benefits.
If you are charitably inclined, the best option for you may not be cut and dry. Everyone has different situations and goals when it comes to gifting to charity. Reach out to your Burney Advisor to discuss the different ways you can make the world a better place.
Here are the standard deduction amounts for 2019
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