Donors and nonprofits have now had most of 2018 to consider the effects of the 2018 tax act on charitable giving. A few tried and true strategies have emerged that should be top-of-mind in 2018 gifting.
Accelerate and Bunch Charitable Gifts. Higher standard deductions and elimination of most itemized deductions (other than state and local taxes (SALT) and a few others) mean that some donors may not be able to itemize and claim their charitable deductions. However, many taxpayers can accelerate and “bunch” charitable gifts in 2018 to claim those deductions. Donors can prepay installments on pledges or make gifts in 2018 to “prepay” gifts they would have made in ensuing years; in the latter strategy, creating a donor advised fund can yield a deduction now but the gift actually is sent to the charity in a future year.
Consider Non-Cash Gifts. In many cases, by giving appreciated assets like stock rather than cash, donors can claim the same income tax deduction, but will also avoid capital gains taxes.
Make IRA Rollover Gifts. Donors age 70½ or older can make up to $100,000 of distributions to charity from an IRA each year. No income tax deduction is available, but an IRA rollover distribution counts as the required minimum distribution and is excluded from gross income. For donors who won’t be able to itemize charitable deductions in 2018, the IRA rollover is a great way to make tax-beneficial charitable gifts in 2018.
Substantiation is Important. The IRS has very strict rules about properly documenting your charitable gifts and strongly enforces those rules. Receipts and records are required for most gifts and qualified appraisals are required for larger gifts of property other than cash and publicly traded securities. Donors should consult their tax advisors to make sure they comply with the rules.
Timing is Critical. Year-end gifts must be delivered to the charity on or before Dec. 31. A check can be mailed by Dec. 31, but a gift of publicly traded securities must be received into the account of the charity by the end of the year. Other property gifts also have delivery requirements.
Please contact your Gray Plant Mooty lawyer if you have charitable giving questions.
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