Americans are a generous bunch. According to Giving USA: The Annual Report on Philanthropy, Americans gave more than $400 billion to charity last year. 70% of that number was from individuals; people like you and me.
This year, however, that could change.
For the 2018 tax year the standard deduction rises from $12,000 for a married couple filing jointly, to $24,000. This is good news for many people, but it also means that you may not receive a tax deduction on your charitable donations if your itemized donations (which includes charitable gifts) total up to less than $24k.
But there may be a workaround.
By consolidating your charitable gifts into one year, your deductible amount may be high enough to make sense for you to itemize your deductions in 2018.
Let’s say you typically give $5,000 per year to your church. Normally, you would list this among your itemized deductions and deduct it from your AGI. This year, with the higher standard deduction, it’s possible that you may not itemize deductions on your tax return, opting for the higher standard deduction instead.
If you are confident that you will give another $5,000 in 2019, you may be better off to give $10,000 to your favorite charities in 2018 and skip a year in 2019. This way, your total itemized deductions will be higher and may exceed the $24,000 standard deduction amount.
This strategy works especially well if you have committed to giving to a capital campaign or made other financial commitments that will require you to continue giving over the next few years. If you have the resources to do so, you may be better off to make the entire gift (and take the tax deduction) now, rather than spreading it out and missing out on the tax deduction in subsequent years.
December 31 is coming up fast. If it is in your heart to make a financial gift to your favorite cause, check with your tax professional to see if you would benefit from accelerating or “bunching” your charitable contributions into the current year.