The Tax Cuts and Jobs Act of 2017 created a great deal of concern regarding its impact on charitable organizations and the deductibility of charitable contributions.
Bob Baldwin, CPA for Baldwin and Associates, and Treasurer of Lowcountry Land Trust Board of Trustees shares four important details about the new Tax Cuts and Jobs Act of 2017. Let us delve into the results of the new law.
First, individuals actually may donate more of their adjusted gross income to qualified charities than in the past. In the past, cash contributions to charities could not exceed 50% of the adjusted gross income of the individual. In 2018, individuals may make cash contributions up to 60% of their adjusted gross income.
Second, the rules concerning charitable conservation easements remain unchanged from 2017. The incentives for the donation of qualified easements remain substantial and worthy of consideration.
Third, it is true that tax rates came down from a maximum of 39.6% to 37% so the amount of income taxes savings from charitable deductions came down from prior years. But the rate differential may not be as great as you think. You need to examine what rate applies to your gift to be able to measure the importance of the tax deduction to you.
Fourth, the big focus is on the fact that the standard deduction was increased across the board. This is the amount that each individual has which shelters income from tax. The increase means that many individuals may not itemize their deductions which includes charitable gifts unless the amounts exceed the standard deduction. So, donor’s may find that their charitable gifts are reflected in the standard deduction and thus don’t further reduce their income taxes.
While this is true, we need to be reminded that individuals over the age of 70 continue to be able to transfer as much as $100,000 of their individual retirement accounts to qualified charities without reporting the amount as income followed by a charitable itemized deduction. So those individuals who direct Qualified Charitable Donations from their Individual Retirement Accounts continue to achieve in effect tax deductibility of their charitable contributions funded by retirement funds.
As always when planning to make charitable transfers for income tax savings, contact your tax advisor to help you know that you will achieve your desired results.
