Charitable Giving After the 2017 Tax Cuts

SGH Wealth Management’s “Read What I’m Reading” Nov 2019 | Nov 1st, 2019

The Tax Cuts and Jobs Act of 2017 (TCJA) ended millions of taxpayers claiming itemized deductions in favor of the expanded standard deduction. With this more simplified tax filing one can deduct charitable donations only if you itemize your tax return. Add up the money you donated to organizations like the Red Cross, churches, synagogues, mosques and other nonprofit organizations; And this total needs to exceed the standard deduction before the giver receives any taxable benefit.

However via a Qualified Charitable Distribution (QCD), some individuals can still make those donations with pretax dollars, resulting in significant tax savings. One of the keys is to process these charitable contributions from one’s IRA in a check made payable directly to the charity. By doing so, the tax-free treatment of QCDs equates to a 100% deduction because you’ll never be taxed on those amounts.

In addition to tax-free treatment, you can satisfy the Required Minimum Distributions that start at age 70.5 and never pay taxes on the QCD amount.

Clients who have grown accustomed to itemizing, may be disappointed that their philanthropy is now packaged within the higher standard deduction and limited SALT provisions. If you still want to support your local charities, a QCD may be the answer to be both charitable and tax thrifty. Contact us to learn more about Qualified Charitable Distributions (QCDs).

Tis the Season for “27 Moves to Make before 2020” from Kiplinger‘s Magazine including thoughts from Sam G. Huszczo, CFP, CFA: