To inform everyone about planned giving and the significant impact it can have on creating real change for adult literacy, we will be posting a monthly blog about planned giving with a range of helpful information.
This blog consists of helpful information about the Tax Cuts and Jobs Act of 2017, how it impacts charitable giving, and what can be done. This information is provided by R&R Newkirk.
What is the impact of the Tax Cuts and Jobs Act of 2017?
The largest tax reform act since 1986 was signed into law on December 22. It includes several changes that will affect charitable giving including:
- The gift, estate and generation-skipping tax credits will shelter gifts and estates up to $11.2 million (adjusted for inflation).
- The deduction limit for cash gifts to charity is increased from 50% of AGI to 60%.
- The 80% charitable deduction allowed for payments for the right to purchase tickets to athletic events at colleges and universities is repealed.
4 Charitable Giving Strategies
1. Qualified charitable distributions (QCDs) from IRAs are advantageous for eligible donors. Although no charitable deduction is available, the income tax that is normally owed on withdrawals is avoided. In addition, because QCDs can satisfy required minimum distributions, income tax savings can be realized. QCD rules:
- Donors must be at least age 70½ on the date of the gift.
- QCDs can come only from IRAs, not 401(k)s or other retirement accounts.
- A maximum of $100,000 may be given annually.
- The transfer must come directly from the IRA custodian.
- QCDs can be made only to public charities, not to private foundations or donor advised funds.
- Distributions can be used to satisfy a donor’s pledge.
2. Life-income gifts such as charitable remainder trusts and charitable gift annuities offer several advantages to satisfy philanthropic goals. Because deductions for remainder trusts and gift annuities tend to be larger, donors may be able to itemize in the year a gift is arranged. Payments from life-income gifts may be attractive to donors who would normally make bequests to charity through a will or living trust, providing income tax, and possibly capital gains tax, savings.
3. Making gifts of highly appreciated assets allows donors to avoid the capital gains tax that would be due if the assets were sold, offering tax savings even if the taxpayer uses the standard deduction.
4. Those with donor advised funds can direct gifts to public charities. A donor may be able to itemize by making a larger gift to a donor advised fund, from which annual gifts can be made over several years. Contributing appreciated securities to a donor advised fund provides added tax savings.
IRA Qualified Charitable Distributions
IRA owners ages 70½ and older may make charitable gifts directly from their IRAs of up to $100,000 annually. Income tax deductions are not available for IRA “qualified charitable distributions” but donors may save taxes anyway, where gifts take the place of required minimum distributions, which are generally 100% taxable. IRA gifts may be especially attractive to donors who do not itemize deductions on their income taxes. Note: It’s important that you coordinate IRA contributions with our office. We will need to provide you and your IRA custodian with important information and ensure that you receive appropriate tax receipts.