Market Overview
Giving from your heart – but with your head
One of the great joys and privileges of working at – or, better yet, being retired from – a well-compensated profession is giving back. We strongly encourage you to follow your philanthropic instinct, but … well, there’s always a “but”. This time, it’s that we’re in the first year of a new tax code, and there were bound to be changes in the rules on how to most effectively donate to your most heartfelt causes.
Deductive reasoning
Let’s start by calling baloney on one urban legend about The Tax Cuts and Jobs Act: Some have said, erroneously, that the new law eliminates the charitable giving deduction. It does no such thing.
Still, the new law does little to encourage donating to non-profits. Remember, you can only claim a charitable deduction if you file an itemized return. Considering that the new tax law practically doubles the standard deduction, it’s likely that fewer individuals and couples will take the time and trouble to file itemized returns. In one sense, this is good as itemizing means more time spent adding up expenses and filling in forms – an unpleasant task if done by oneself, and often an expensive one if done on one’s behalf by a tax professional. And ultimately it might not save the taxpayer a dime.
Giving advice
So, essentially the new tax code assumes you’ll be giving as much to charities as you used to, but the government isn’t going to know for sure because far fewer tax payers will be filing itemized returns. Human nature being what it is, non-profits have reason to be concerned.
Need they be? Of all the reasons to give to charity, a lower tax bill is probably toward the bottom of the list for most charitable contributors. Even so, everyone likes a lower tax bill, so maybe you should raise the subject with your financial advisor.
To start the discussion, though, legal information site Nolo.com offers a few pointers:
- Appreciated investments: Donating shares of stock or other securities allows you to deduct up to their full market value without having to pay capital gains tax on the appreciation.
- Individual retirement accounts: Donors over age 70 can contribute up to $100,000, which counts toward their required annual IRA distributions and is excluded from their taxable income.
- Big contributions: If you continue to itemize your deductions, you’ll probably find it necessary to increase the dollar amount of your charitable gift to make it worthwhile. Consider doubling your contribution by making it a biennial gift.
These basic tips were echoed by Kiplinger’s, CNBC and other sources of financial information. Forbes was a resource not only for these ideas, but also put forth some suggestions on how those with extensive wealth can better calibrate their giving.
That said, it’s always better to get your financial advice from a trained professional, so please contact your financial planner.
We wouldn’t presume to tell you which charities are most worthy of your contributions, but it’s safe to say that much of the U.S. aviation community is still reeling from the impact of this past hurricane season, which was particularly devastating. And 2017’s hurricane season wasn’t much easier. Here’s a link to select a non-profit institution that is helping with relief efforts in the aftermath of the storms, courtesy of Charity Navigator.