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The Season of Giving May Have Changed to The Season of Maybe Giving

I know I’m not the only who can’t believe we are nearly at the end of 2018.  As a family we certainly enjoyed watching our daughter playing soccer and our son on the football field.  I will admit I’m glad the outdoor sports season is over as it seems like winter cold has settled in.   With the holidays coming fast, I’ll state my favorite Christmas movie is Elf.  At the risk of scorn from one and all, my favorite Christmas song is here:

https://www.youtube.com/watch?v=nud2TQNahaU

You have to love the ‘80’s.  If you don’t agree with me, I’d love to hear about your favorites.

As we near the end of the year, many of us are considering our final charitable donations for 2018.  Congress passed tax regulations for 2018 that should be considered carefully.  This included changes in tax rates and various deductions. 

The Tax Cuts and Jobs Act that went into effect in January of this year may influence people’s charitable giving.  The main reason is that the standard deduction has nearly doubled to $12,000 for individuals and $24,000 for joint filers.  Other changes include:

·         Elimination of deductions for HELOCs and

·         Limits on local, state, property, and real estate tax deductions to $10,000

·         Miscellaneous itemized deductions are no longer allowed

·         Increase in cash donation limit to 60%

Itemization of deductions will likely decline from the current rate of 30% of filers to an estimate of only 10%.  There’s concern that donations will decrease because of these changes with some estimates of a decrease in $90 billion.   While no on can be sure, it’s likely we will see a shift to higher amounts of giving from the wealthy who will continue to itemize.  

I doubt the decline in giving will be as dramatic as noted above.  Americans are a generous people.   The Charities Aid Foundation ranked the United States 2nd in the world in its Charity Giving Index 5-year ranking.

Charitable giving generally takes three forms:  donations of cash, appreciated assets (in various forms) or time.  Of the three, people seem derive the most satisfaction from donating their most valuable commodity, their time.  Personally, I volunteer my services to the Family Reach organization offering pro bono financial planning services to families facing cancer.  You can check them out here:  www.familyreach.org

There are several strategies taxpayers can apply to maximize savings while still making donations to their favorite charities.  For example, if you regularly donate a similar amount every year you may want to consider “bunching” two years of donations into one year.  This works if the donations put you over the standard deduction amount. 

Another effective approach is to donate appreciated stock rather selling it out right and donating cash.  This method gives the taxpayer a higher deduction and if done correctly a higher donation amount. 

If shares are closely held (non-publicly traded), a Donor-advised Fund account can be used to make the donation and get a deduction for the appraisal value.  This is a bit more complicated and requires careful advance planning. 

Donor-advised funds can be a great strategy for those who itemize especially for appreciated non-cash assets or in high income years.

If you have any questions or would like to discuss further, I’m happy to meet for a free, no obligation consultation.

Please feel free to share with others and make suggestions for future articles: peter.oneill@fiduciamwealth.com

Peter O'Neill