Charitable contributions under the new tax law

[arminnie]

Some people may no longer itemize deductions to take advantage of charitable contributions. There's another thread about prepaying taxes because of the tax law changes.

When I was retiring I realized that I might no longer be itemizing. So I set up a Charitable Gift Fund with Fidelity. I think several financial institutions offer these. The contribution that I made to set it up was 100% tax deductible that year when I had a higher income and was itemizing. But I've been making donations out of it for the past 15 years. Plus the funds are invested so they actually have grown.

Not for everyone. I think it's a $5000 minimum to set it up. But I thought to set up something like this you would need hundreds of thousands of dollars.

 

[twoolle]

I am the finance administrator for our church and we have several families paying all of their 2018 tithe this week!

 

[OrangeBirdGirl]

I made sure to go through the house and do a few large Goodwill runs this week to take advantage of the final tax deduction. I wonder how much charities you donate cash to and places like Goodwill will be hurting next year?

 

[arminnie]

If someone has the financial resources to fund a Charitable Giving Account this year they could take a significant deduction this year to make up for not being able to do so in future years. Again not for everyone - but it might help some.

 

[kydisneyfans]

I am the finance administrator for our church and we have several families paying all of their 2018 tithe this week!

We are giving all planned charitable giving for 2018 tomorrow. We will continue giving but it will be double every other year.
I expect charities to feel the hurt as a result.

 

[wendow]

I'm worried about this aspect of the tax bill. We give to our church as well as other charities on a monthly basis and we will not change our giving. However, it will hurt to lose the deduction and I worry how many people will quit giving since there is no longer a tax incentive to do so. My worry is even bigger than that though. My dh works for a religious nonprofit and they rely on donor giving to operate. Giving has been down the last several years and I fear this is going to worsen the situation.

 

[wendow]

I am dismayed that the politicians who created this tax bill decided to can the charitable donations deduction. For years, tax deductions have been a way to incentivize certain behaviors, i.e. encouraging homeownership, encouraging higher education, etc...I can't understand the reasoning behind the kibosh on charitable giving.

I truly agree with you here. I'm happy so many will benefit but I really don't 'get' this bill and the tax deductions that are being eliminated.

ETA: We went ahead and gave 6 mos of church giving for 2018. We can only afford so much at this point. All our other charity giving is set to autopay so we left it alone.

 

[kydisneyfans]

The charitable contribution wasn't canned, but with the higher standard deduction and loss of other deductions, many who used to itemize will now take the standard deduction.

We itemized around $35,000 last year. With the loss of unreimbursed work expense and home office(over 6K for us:cel phones, fax lines, and business internet isn't cheap), plus the cap on SALT/property taxes, along with the mortgage interest on 1 loan only(we have home equity interest we are losing), our 2018 estimate is now $22,000. It will be better for us to take the standard, hold onto the 8K we have in the budget to give, then in 2019 we itemize again and take the $30,000 itemization. With that being said, we may no do things that way.

We did shave about $1,000 from the giving to offset our tax increase. Another item is we normally give generously to non-profit organizations. Without the tax benefit, I'm more likely to give additional dollars to the gofundme pages of friends that need $$ instead. Before giving to non-profits gave us a 25% tax benefit, now it gives nothing. The grinch hasn't hit here, but how we give, when we give it, and who we give money to is definitely changing in 2018.

 

[bdcp]

We do not donate to charity for the tax deduction. It's called charity for a reason. That's all I'm going to say about that.

 

[piccolopat]

We do not donate to charity for the tax deduction. It's called charity for a reason. That's all I'm going to say about that.

I understand your point but the tone of your post comes across as judgmental. Some people are able to give a little bit more to charities because of the money they save via the tax deduction. Some people will be hit hard by the tax law changes (we'll have to pay thousands more due to the SALT cap) and will have to make up the loss someplace in their budget. I'm afraid that for some people, charitable giving will be one area to cut.

 

[bdcp]

I understand your point but the tone of your post comes across as judgmental. Some people are able to give a little bit more to charities because of the money they save via the tax deduction. Some people will be hit hard by the tax law changes (we'll have to pay thousands more due to the SALT cap) and will have to make up the loss someplace in their budget. I'm afraid that for some people, charitable giving will be one area to cut.

Tone? I stated a fact that's applicable to us and many others. It's a fact that charity is charity. The definition doesn't include tax deductability.

 

[arminnie]

Just found this at Fidelity’s web site. Won’t affect most here, but a few of us and maybe some of your parents qualify.

Some retirees may want to take advantage of Qualified Charitable Distributions, which allow them to donate directly to charity from their individual retirement accounts without having to itemize those donations (after 70 1/2 years old).

Anyone that age has to take a minimum required distribution from a regular IRA.

 

[MaryLovesPoohBear]

I made sure to go through the house and do a few large Goodwill runs this week to take advantage of the final tax deduction. I wonder how much charities you donate cash to and places like Goodwill will be hurting next year?

We do not donate to charity for the tax deduction. It's called charity for a reason. That's all I'm going to say about that.

I was going to say pretty much the same thing.

I wonder if charitable giving actually goes up. Most people will have more money in their pocket, and those that feel the desire to give, now have more to give.

My husband and I are already talking about increasing our donations.

 

[piccolopat]

Tone? I stated a fact that's applicable to us and many others. It's a fact that charity is charity. The definition doesn't include tax deductability.

If the new tax law cost your family thousands of dollars and you had to choose between paying your bills and giving to charity, what would you do? If you use to give $5000 and were in a 25% tax bracket, losing that deduction now takes $1250 out of your family budget. That's not insignificant.

 

[arminnie]

The charitable contributions deduction HAS NOT BEEN ELIMINATED.

The standard deduction was $12,700. It is now $24,000.

A person who has more than $24,000 in deductions will still be able to deduct charitable contributions in excess of that amount.

A person who no longer itemizes anything may still come out ahead.

Example:
A person who has $12,700 in itemized deductions current can itemize charitable deductions in excess of that amount today.

Say that person gives an additional $5000 to charities (generous).

Under the current tax code they would itemize $17,700 in deductions.

Under the new bill they get to take a $24,000 deduction.

I’ll take new option and will enjoy not having to spend time keeping track of all those records.

 

[arminnie]

If you use to give $5000 and were in a 25% tax bracket, losing that deduction now takes $1250 out of your family budget. That's not insignificant.

Please see my example above. This is NOT true for everyone. Many people who “lose” that $5,000 deduction are going to “gain” a lot more with the $24,000 deduction.

Not everyone is going to lose. Many of those in high tax states will lose - but that’s just one of the costs of where one chooses to live.

Of course I am sure there will be people who realize they can deduct $24,000 without giving a dime to charities. And then will give nothing.

 

[snarlingcoyote]

Please see my example above. This is NOT true for everyone. Many people who “lose” that $5,000 deduction are going to “gain” a lot more with the $24,000 deduction.

Not everyone is going to lose. Many of those in high tax states will lose - but that’s just one of the costs of where one chooses to live.

Of course I am sure there will be people who realize they can deduct $24,000 without giving a dime to charities. And then will give nothing.

You're getting dangerously close to politics with that statement. . .

 

[arminnie]

You're getting dangerously close to politics with that statement. . .

Oh I didn’t mean it that way at all. One of my homes is in uptown New Orleans on St Charles Avenue. I pay a lot of money to live there vs in a small town 50 miles away. That’s just a price I pay for where I choose to live.

 

[piccolopat]

Please see my example above. This is NOT true for everyone. Many people who “lose” that $5,000 deduction are going to “gain” a lot more with the $24,000 deduction. Not everyone is going to lose. Many of those in high tax states will lose - but that’s just one of the costs of where one chooses to live. Of course I am sure there will be people who realize they can deduct $24,000 without giving a dime to charities. And then will give nothing.

I know the tax bill will be good for many people and I am happy for them. It is unfortunate that other people (and NOT the rich) will be hurt solely because of where they live. You say it's the cost of where one chooses to live but many people have lived in high tax states all of their lives and had full SALT deductibility. Most people don't want to move away from friends and family and so they stay in the states they grow up in. Some of them may have chosen to move to a lower tax area if the SALT tax was announced well in advance. Some may have made other budget choices if they knew this was going to hit them in 2018. We plan to move in 2-3 years but will have to pay this extra "penalty" until then. I think Congress should have found a way to keep SALT for families under $300K in income (middle class in a lot of these areas) even if it meant a corporate rate of 22% instead of 21%.

 

[arminnie]

I am not claiming that the tax bill is the best thing ever. I am just trying to provide facts and clear up some misconceptions.

Charitable deductions have been not been eliminated. Stating that they have been eliminated because you can no longer itemize does’t mean they have been eliminated across the board.

Some of the statements that people make about the tax bill leave the impression that everyone who can no longer itemize will be penalized. Not true.

I don’t blame those who are hurt for wanting things to be different.

And I understand people not wanting to move. But there’s a price for most of our choices. I had to leave friends and family to live in some really cruddy places to earn a living.

And I had to eventually leave California where I was born and had long ties because I just couldn’t afford to live there anymore.