People continue to make sense of the new tax law.  What are the opportunities and challenges particularly as it relates to charitable giving?

First, the law allows for people to give up to 60% of their adjusted gross income.  If you make $100,000, you can give $60,000 and deduct the entire amount.  While many may not see this as an opportunity, it will provide a unique opportunity for major donors who are seeking to increase their giving.

Second, the new tax law lowers the corporate tax rate from 38% to 21%.  That 17% drop means more profits but also more opportunity to give.  Whereas some corporations might have felt challenged to give in the past, the lower tax rate gives them that margin.

Third, the new tax law kept in place the 30% deduction of capital assets.  So people can still deduct non-cash assets like real estate and even closely held business interests to maximize their income tax deductions.  This non-cash deduction should be read in light of the challenge below.

The challenge to the new tax law is that it raised the standard deduction for individuals to $12,000 and $24,000 for married couples.  In addition, the SALT (state and local income tax) deduction was capped at $10,000.  So for many, the standard deduction and SALT cap may prove a hurdle difficult to overcome.  In other words, even with their giving and other deductions they may not be over the standard deduction.

How to address the challenge?  First consider using capital assets to raise your charitable giving—whether it is the donation of a car, collectible, real estate or even a business interest, the inclusion of a capital asset may propel deductions over the standard deduction.

Alternatively, people can “bunch” their charitable giving.  One family who gives $10,000 a year told me that that doubled their giving to $20,000.  They put the $20,000 into a donor advised fund, and with the other deductions they had, they rose above the $24,000 standard deduction.  However, they’ll give $10,000 in calendar year  2018, and the remaining $10,000 in calendar year 2019, from their donor advised fund.  They’ll plan to use the same “bunching” strategy in 2020.

Bill High

Bill is CEO & Founder of Vyne Legacy. He works with families to equip them with tools to build multigenerational legacies, and he teaches givers and financial advisers on transformational biblical generosity. He is the co-author with David Green of Giving It All Away and Getting It All Back Again: The Way of Living Generously.

Published July 6, 2018

Topics: Giving Strategies

Donor Advised FundsGiving StrategiesTaxes