Tax Changes Impact Charitable Strategies


Those thinking of making year-end charitable contributions need to take the tax code changes that were implemented this year into effect.

That’s according to Rachel A. Gross, the director of planned giving and endowments at Jewish Federation of Greater Philadelphia, who recommended checking with a tax and/or financial adviser before making any decisions.

“Each time [the tax code] changes, people are confused,” she said.

Here are a few things to note as the end of the year approaches and you make your charitable giving decisions.

Charitable Deductions not Eliminated

Some believe the tax changes eliminated charitable deductions, which isn’t the case, Gross said.

“That didn’t go away,” she said.

What did happen is that the standard deduction was increased to $12,000 for a single taxpayer, or about $24,000 for a married couple. A year earlier, the standard deduction was $6,500 for single taxpayers and married couples filing separately and $12,700 for married couples filing jointly.

The end result is that fewer people will be itemizing their deductions because the standard deduction will be more advantageous for a greater number of taxpayers.

It will remain an important part of tax planning, however, for those who continue to itemize, Gross said.

‘Bundling’ or ‘Bunching’ Deductions

Those who don’t have enough deductions to itemize could consider a practice known as “bundling” or “bunching,” Gross said.

That practice involve combining your charitable gifts in some years so you are able to itemize in those years.

For example, say a couple normally makes about $15,000 in charitable gifts annually, but because of the new larger standard deduction, they were not planning to itemize — or made smaller or fewer charitable gifts.

Instead, they could place a larger amount (say $40,000) in a donor-advised fund at Jewish Federation, use those dollars over several years and still itemize their 2018 tax returns.

The IRA Charitable Rollover

Those over the age of 70½ with an IRA charitable rollover may direct the required minimum distribution (RMD) to charity — and don’t have to pay income tax on it, Gross said.

“There are new people becoming 70½ every year,” who don’t realize they can do this,” she said, noting that this became a permanent opportunity several years ago.

Up to $100,000 annually may be transferred.

Do note that you won’t receive a charitable deduction because you are not reporting the contribution as income; it still can be, however, an effective way to decrease your taxable income via charitable giving.

Also note that while you can’t use the IRA rollover to fund a donor-advised gift or charitable gift annuity, you can use it to make annual, capital or permanent fund gifts.

Gross said those who don’t need to use all or part of their RMD can begin to create a personal legacy by establishing a fund at Jewish Federation targeted toward a cause or causes of personal importance. Part or all of your RMD can be added to the fund on an annual basis.

For example, a person could take use 80 percent of their RMD annually for their own needs and establish a charitable gift annuity at Jewish Federation to, say, care for the elderly with the remainder. Those percentages could be changed at any time depending on the donor’s needs.

Contact Gross at [email protected] or 215-832-0572 for information about using your IRA or for other questions about making permanent gifts to Jewish Federation.

[email protected]; 215-832-0797


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