The Tax Cuts and Jobs Act of 2017 increased your standard deduction, which lowered your incentive to itemize deductions, including for charitable donations. This causes many to ask if there are any tax benefits left in making charitable contributions? Well, it depends! Here are three tax benefits to consider.
- Limitations Suspended: The new tax law suspended the limitations on itemized deductions. Translation – You are no longer limited by the amount of your charitable contribution for which you will receive credit. Prior to the change in the law you would only receive credit for some of your charitable contribution and not the entire amount. With the change in the law it is possible now to receive full credit for your contribution.
- Increased Deduction Amount: Under the old tax law you were only allowed to deduct charitable contributions up to fifty percent (50%) of your base or adjusted gross income. Under the new tax law you are able to deduct up to sixty percent (60%) if you’re making cash contributions to a public charity.
- Donor Advised Funds: A Donor Advised Fund (DAF) is a giving vehicle established at a public charity. It allows the donor to receive an immediate tax deduction and then recommends the grant from the funds at a later date over time. One tax benefit is that you can designate the recipient of your funds later and NOT at the time of your contribution.