Skip to main content

For Advisors: Open A DAF Account | Getting Started

For Donors: Grant Making Portal | Getting Started

Contact Us   

  • Home
  • About AEF 
    • Vision, Mission & Values
    • Policy Statements
    • Our Team
    • Careers
    • Board of Directors
    • Council of Advisors
    • Getting Started
  • Donors 
    • What is a Donor Advised Fund?
    • Library for Donors
    • Sign Up for Guidance for Good
    • Understanding the Granting Process for Donors
    • How to Make Grants
  • Trusted Advisors 
    • Investments
    • Partner Gateway
    • AEF Insights Newsletter Signup
  • Thought Leadership 
    • Choosing a Donor Advised Fund
    • Real Estate
    • Charitable Trusts
    • IRA Charitable Rollover
    • Retirement Planning
    • Life Insurance
    • Scholarships
    • Charitable Planning Conversation
    • Private Foundations
    • Tax Savings
    • Bequests
    • Building your Financial Practice
    • Estate Planning
    • Roth IRA Conversion
    • Closely Held Shares
    • Agriculture
    • Forced Capital Gains
    • Selling a Business?
    • Donors: Advice for Giving
  • Videos
  • Access My Fund Login
  • Forms
  • Liquidity Replenishment Process
  • Grant Making
  • Brochure

 

    You are here

  1. Home
  2. Blogs
  3. Charitable Giving After Tax Reform

Charitable Giving After Tax Reform

Submitted by American Endowment Foundation on January 22nd, 2018

By Mark Miller, Guest Columnist

The tax rules governing charitable contributions remained largely intact under the Tax Cuts and Jobs Act, which was recently signed into law by President Trump. The new law actually increases the allowable deduction for cash donations made to public charities from 50 percent of Adjusted Gross Income (AGI) to 60 percent of AGI.

Tax ReformDespite the deductions for charitable giving being largely unchanged, there has been concern expressed by charities that charitable giving may be adversely impacted by the tax reform legislation. One of the major goals of tax reform was simplification and that was primarily achieved by almost doubling the standard deduction.

For married couples, the standard deduction was increased from $12,700 to $24,000. The increase in the standard deduction, coupled with the capping of the state and local tax deduction to $10,000, means far fewer taxpayers will be itemizing their deductions in the future, indirectly affecting charitable giving.

The concern from charitable organizations is that taxpayers may be less charitably inclined if they don’t receive a tax benefit from their donations. Ideally, taxpayers donate to charity for helping our communities and special causes, but many individuals are motivated by the tax savings as well.

Charitable Giving Then and Now

Before tax reform, approximately 30 percent of taxpayers itemized their deductions, but now it is anticipated that as few as five percent of taxpayers will do so. While not a new concept, the bunching of charitable donations in alternate years may allow many taxpayers to continue to receive savings from their charitable giving.

Bunching Charitable Donations

Assume a married couple has $6,000 of mortgage interest and is capped at $10,000 of deductions for their property taxes and state and local income taxes. With the new standard deduction level at $24,000, this couple would receive no tax savings from the first $8,000 of charitable contributions.

If the couple gives $10,000 annually to charity by bunching their donations in alternate years, they would claim the standard deduction in one year ($24,000) and itemize their deductions in the alternative year ($36,000, comprised of $20,000 in charitable donations, $10,000 in taxes and $6,000 of mortgage interest.)

Over the two year period, the couple generates an additional $8,000 in tax deductions.  If the couple falls in the 32 percent tax bracket (with taxable income over $157,500), bunching would provide a permanent tax savings of $2,560.

One vehicle that makes it easy for taxpayers to bunch their charitable donations is a donor advised fund (DAF). The taxpayer is able to claim the charitable tax deduction in the year of funding the DAF, and can make grant requests to the desired charities over one or more years. The couple in the example would donate $20,000 in year one, but spread the actual grants made to charities over a two-year period.

The tax savings is further compounded if the couple contributes appreciated long term capital gain property to the DAF by purging the inherent gain in the contributed property.

While a relatively simple strategy, the savings can be considerable and should be a part of most charitable discussions.

Mark Miller is a CPA and Tax Partner for Sikich LLP in Milwaukee. He is a member of the AEF Council of Advisors.

We at American Endowment Foundation look forward to discussing your needs and interests in greater detail. Contact or call us at 1-888-660-4508 and let us discuss how donor advised funds can play a role in charitable planning.

Download our InfoSheet on   Charitable Bunching

Tags:
  • taxes

Categories

  • 1031 exchange (1)
  • 401(k) (1)
  • accountant (1)
  • agriculture (1)
  • alternative assets (1)
  • alternative investments (1)
  • amt (1)
  • appreciated assets (3)
  • appreciated stock (1)
  • art donation (1)
  • bad market (1)
  • bargain sale (1)
  • beneficiary (1)
  • business exit (2)
  • business growth (1)
  • business sale (2)
  • c-corp shares (1)
  • capital gains tax (2)
  • cares act (2)
  • carried interest (1)
  • charitable bequests (1)
  • charitable bunching (1)
  • charitable bundling (1)
  • charitable donations (3)
  • charitable gift annuity (1)
  • charitable giving (12)
  • charitable lead trust (2)
  • charitable planning (17)
  • charitable remainder trust (2)
  • charity (1)
  • chnpts (1)
  • client relations (1)
  • closely-held shares (4)
  • clt (2)
  • commodities (1)
  • contemporaneous written acknowledgement (1)
  • corporate daf (2)
  • corporate donor advised fund (2)
  • corporate giving (2)
  • cpa (2)
  • crt (2)
  • divorce (1)
  • donor (1)
  • donor advises funds (1)
  • down market (1)
  • down markets (1)
  • ESG (1)
  • estate planning (4)
  • grant making (1)
  • HNW (1)
  • impact investing (1)
  • independence (1)
  • insurance (1)
  • international giving (1)
  • ira (1)
  • ira charitable rollover (1)
  • legacy (1)
  • legacy fund (2)
  • next gen donors (1)
  • non-publicly traded stock (1)
  • noncash assets (1)
  • opening a daf (4)
  • partner gateway (1)
  • philanthropic advisors (4)
  • philanthropic planning (10)
  • placeholder fund (5)
  • private foundations (6)
  • private-label DAFs (2)
  • qcd (1)
  • qualified charitable distribution (1)
  • real estate (5)
  • recession (1)
  • required minimum distribution (1)
  • retirement planning (2)
  • rmd (1)
  • roth ira (1)
  • scholarships (1)
  • stacking (1)
  • successor advisor (1)
  • tax breaks (1)
  • tax cuts and jobs act (1)
  • taxes (13)
  • terminating a private foundation (2)
  • transfer (2)
  • wills (1)

AEF Footer - Custom

Offices

Donors

Advisors

Resources

5700 Darrow Road, Ste. 118
Hudson, OH 44236

Get Directions

Phone: 1-888-440-4233
Fax: 330-656-2063

  • What is a Donor Advised Fund?
  • Library for Donors
  • Guidance for Good newsletter Signup
  • Understanding the Granting Process for Donors
  • How to Make Grants
  • Investments
  • Partner Gateway
  • AEF Insights Newsletter Signup
  • Thought Leadership
  • Forms
  • Policy Statements
  • Board of Directors
  • Our Team
       

Advisor Support: advisorsupport@aefonline.org
Donor Support: donorsupport@aefonline.org

© 2023 American Endowment Foundation. All rights reserved.

Website Design For Financial Services Professionals