As the holidays roll around many people do their annual charitable giving. And these gifts usually come from the heart. But there’s also the tax deduction. Unfortunately, this year many taxpayers may find that their charitable donations won’t be deductible, though they may not learn that until their tax return gets filed in a few months.
A year ago the Tax Cuts and Jobs Act was passed and dramatically changed the federal income tax laws beginning with 2018. Many items that had been deductible are no longer deductible and there are caps on other items. The standard deduction was nearly doubled to $12,000 for single filers and $24,000 for married people filing joint returns. The combined effect is that many people that itemized their deductions will no longer be able to itemize and instead will simply use the standard deduction. At Vintage, more than two thirds of our clients itemized their deductions last year, but our analysis suggests that only about 28% will itemize this year. And, if you don’t itemize, then there’s no tax deduction for your generous donations.
Depending on your situation you may be able to use a new strategy referred to as “bunching” to generate additional tax savings, especially in regards to charitable gifts. See an example of how it works in our blog piece, New Tax Strategies.