May 22, 2019
The Tax Cut and Jobs Act of 2017 contains changes to the tax code that impact just about every taxpayer in some way.
A few changes:
- Many families may have more to give. Marginal tax rates are lower, and the income levels at which they kick in are higher.
- Many business owners may have more to give. Businesses are taxed at 20% instead of higher individual tax rates and previously higher business tax rates.
- Some generous people may have even more to give. The cap on the amount of income that can be given has been raised from 50% to 60%.
- Some families may have less to give. Standard exemption amounts have increased, which will allow some people to itemize deductions without the need to make charitable gifts.
God has not changed
God does indeed still love and bless our wise, joyful, intentional generosity. He also says we should remit the taxes we owe or accept the consequences. The new tax law does create some new opportunities to achieve both goals.
Suggestions on how to give wisely
Everyone loves a good “two for one” deal
Consider combining two years of charitable deductions into one tax year, perhaps by making charitable contributions in January and December of the same year. You may be able to claim itemized deductions in one year and take a standard deduction in the alternate year. This need not change the amount you give, just the timing.
Another multi-year plan to consider is to make charitable gifts to a Donor-Advised Fund (DAF). People who give to a DAF may deduct the full amount of their contribution in the same tax year of their contribution, and then direct grants to charities of their choice over several years.
QCDs from IRAs for RMDs
Taxpayers over age 72 and older may consider making a Qualified Charitable Distribution (QCD) from their Individual Retirement Account (IRA) to meet the Required Minimum Distribution (RMD). If you are 70 ½, you are still eligible to make a QCD, even though you are not required to take an RMD. This strategy may result in lowering their taxable income whether they itemize their deductions or not.
*Every person’s situation is unique. Always consult with a professionally licensed financial planner, tax advisor, or estate attorney before making decisions in these areas.
For more information about planned giving at Bethany, or for a referral to a financial, tax, or legal professional, please contact Bruce T. Hakim, director of legacy gifts at (616) 818-4849 or [email protected]