Wills, Trusts & Estates: Plain and Simple – Should I Maximize My Charitable Giving Before Year End?

December 18, 2018

The standard deduction (i.e., the amount you can deduct from your adjusted gross income without itemizing deductions) under the new tax law has increased to $24,000 for married couples and $12,000 for individuals. You are unable to itemize your income tax deductions unless the total of such deductions exceeds the standard deduction. Since charitable donations are deductible only if you itemize your deductions, it is possible that you may not be able to deduct such donations on your income tax returns. The new limit of $10,000 on deductions of state and local taxes
(ex., real estate taxes) exacerbates this issue.

In view of the new deduction limits, it may make sense to bunch up your donations to charity in a single year, so that your itemized deductions for one year total more than the standard deduction amount. For example, assume you typically make charitable gifts of $4,000 each year; your 2018 real property tax deduction is $10,000 (the maximum allowed), and your mortgage interest deduction is $10,000. You would not exceed the $24,000 standard deduction for couples and would lose the ability to deduct your charitable donations for 2018. Instead, you could double your charitable gifts in 2018 to increase your itemized deductions to $28,000, thereby exceeding the standard deduction amount, and permitting you to deduct such gifts for 2018. If desired, you could then reduce your charitable gifts in 2019.

Reprinted with permission from Lloyd Harbor Life, December 2018.

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