How do the changes to the tax code affect the benefits of charitable giving?
The new tax law is a hot topic of conversation everywhere. And the experts are still analyzing and devel-oping materials that explain its impact on taxpayers and chari-ties.
The Tax Law of 2018 preserves the deduction for charitable con-tributions, however it shrinks other itemized deductions and in-creases the standard deduction. Therefore, it is expected that more taxpayers will take the standard deduction rather than itemize their deductions.
However, the reason for giving to a charity, for most people, is not driven by tax benefits, but rather by a belief in the mission of their favorite charities. The upside is that tax savings will leave many taxpayers with more money that they can direct as they choose.
You may be wondering, how the new tax law will affect you and whether you should change the way you support causes dear to your heart.
How will I be affected by the new tax law?
For those who are already taking the standard deduction, the increased standard deduction reduces your tax bill, putting more money in your pocket.
If you itemize your deductions and give small to moderate amounts to charity, you may notice that the increased standard deduction will lower your tax bill more than itemizing would.
Those who have larger annual itemized deductions are less likely to be affected because donations along with other deductions will tend to be greater than the standard deduction. If you itemize deductions, you will most likely get a full tax benefit of your charitable contributions.
The new tax law keeps the charitable deduction and, increases the limit on cash contributions from 50% to 60% of adjusted gross income which will help some taxpayers who make larger gifts to charity.
Should I change the way I give to my favorite charities?
Most people donate because they are passionate about a cause. Not to get a tax deduction. Giving to charity is always a worthy goal, so don’t let changes in the tax code affect your giving plans. If you do decide to make changes, always talk with your financial planner or a tax advisor to determine what makes the most sense for your personal situation.
This information is intended for educational purposes only and is not offered and should not be taken as legal, tax, of other professional advice. Always consult an attorney, financial planner or tax advisor.