Bundle Your Gifts, Supersize Your Deductions

By Robert on November 2, 2018 in Announcement, Uncategorized,

The 2017 Tax Cuts and Jobs Act passed last December has afforded many of our generous donors with tax-wise giving opportunities including a new twist on a proven tactic: Bundling several years of intended contributions into a donor advised fund (DAF) allows you to supersize your income tax charitable deductions.

The new standard deduction is $12,000 for single taxpayers and $24,000 for married persons filing jointly. The new law also sets a $10,000 maximum for state and local real estate and income taxes. These limit many people to only the standard deduction – unless they bundle their charitable donations.

Consider this example for a donor who knows 2018 will be an especially high-income year. They have no mortgage (therefore no mortgage interest to deduct), property tax on their home is above that $10,000 maximum, and their medical expenses won’t be deductible as they will be under 7.5% of their adjusted gross income. They normally donate $30,000 each year to their DAF, so this year they could claim deductions totaling $40,000.

Because they know their income will exceed $400,000 this year, and because they are highly committed to granting from their DAF on a consistent basis to the charities of their choice, they decide to bundle three years of gifts and make them all in 2018. Their $90,000 donation to their DAF will grow tax free allowing them to make recommendations to various charities when they see fit over the next three years.

By bundling these contributions – plus the $10,000 state and local real estate and income maximum – their deduction will be $100,000 in 2018, and they plan to claim only the standard deduction in 2019 and 2020. Their total deduction over three tax years will be $148,000 instead of $120,000, a bonus of more than 20% that sharply cuts their income tax bill.

Everyone’s tax situation is different and now is a great time to talk to your trusted financial advisor before the end of the year rush.

To learn more about your charitable options and how to start a DAF or a legacy fund please contact me at robert@rjfoundation.org or call (804) 545-8656.