Optimizing Tax Savings on Your Gifts to Charity

As tax season rolls around, many may find that their charitable gifts didn’t make the same impact to their taxes as they have in the past. One main reason for this is the higher standard deduction that started in 2018. Because of this change, charitable gifts may not provide the same tax benefit if you used to itemized your deductions but now take the standard deduction.

If this is the case for you, you may want to consider a few ways to maximize your deductions.

If you are over the age of 70 ½ - Consider gifting all or a portion of your required minimum distributions directly to charity. If executed correctly, this will result in less or no taxes on your distribution. You will want to make sure your financial institution can in fact do this. You will also want to let your accountant know that you did this as it is almost never reported on your 1099-R tax document.

If you are under the age of 70 ½ - Consider bunching your gifts into one year. If you would not gift enough to get the maximum tax benefit in one year but would if you bunched 3 years of gifts together, consider doing so. For example, if you gift $10,000/year to your church, consider gifting $30,000 in one year and nothing in years 2 and 3. If you want the deduction but don’t want to give it all right away, consider using a donor advised fund.

It’s important to note, however, that you would have to have enough cash savings to do so and there are limits on how much can be taken as charitable contributions in a year.

Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss.