Under the new 2017 Tax Act, the standard deduction for a single individual was doubled to about $12,000; for a married couple, it was doubled to about $24,000. These increases to the standard deduction mean that most Americans will now be using the standard deduction rather than itemizing their separate deductions. Many individuals who give generously to charity can consider various alternatives for making their charitable gifts.
One alternative is simply to make your charitable gifts in the same way that you made them in the past. This may or may not affect your taxes, depending on whether or not you itemized in the past.
Some individuals are considering bunching their charitable contributions. For example, some will choose to pay their 2018 and 2019 contributions all in December of 2018. By bunching your contributions in one year, you may receive a higher tax benefit for your charitable gifts. In alternating years where your charitable gifts are small, you then will take the standard deduction.
Those who want to bunch two or more years’ worth of contributions into a single year, but would still like your charitable contributions spread out evenly over that period of time may use a donor-advised fund. A donor-advised fund is a public charity that can receive the gift in one year but make contributions to the charity of your choice over your requested time period. Donor-advised funds are held by most community foundations and most financial institutions, as well as the Archdiocese of Detroit’s Catholic Foundation of Michigan. (The Catholic Foundation of the Diocese of Lansing does not currently have a donor-advised fund but hopes to establish one soon.)
Whether this planning tool is right for you depends on your own particular situation. For more information, contact your financial or tax planner.