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Are there still tax benefits for charitable donations?

Yes, the standardized deduction has changed. The Tax Cuts and Jobs Act (TCJA) has basically doubled the standard deduction — currently set at $12,000 for individuals and $24,000 for married couples filing a joint return. This increase makes it much more favorable for taxpayers to file their tax returns using the standardized deduction as opposed to itemized deductions.

In some cases, taxpayers could still make the most of their charitable giving arrangements by “bunching” their donations.

What is bunching? This strategy results in donating once every other year or every couple of years allowing the taxpayer to provide a larger donation. This larger donation could be enough to offset the benefit of the increased standardized deduction rate, making an itemized deduction beneficial for these larger charitable years.

How can taxpayers avoid problems with this type of tax planning? Those who wish to use this strategy can benefit from the following tips:

  • Make sure the organization qualifies. There are some limitations to charitable donations. The Internal Revenue Service (IRS) only allows deductions for qualified charitable organizations. Examples include churches, synagogues and other religious organizations as well as veterans’ organizations and nonprofit volunteer fire companies.
  • Time the donation wisely. Although taxpayers may consider bunching their donations, the donation must generally be made during the tax year in question in order to qualify for the tax deduction.
  • Limitations to charitable giving. The IRS also sets limits on the amount a taxpayer can donate to charitable organizations for tax benefits. This is generally set at no more than 50 percent of a taxpayer’s adjusted gross income.

When done wisely, this type of tax planning strategy can result in reduced overall tax obligations while still allowing the taxpayer to support his or her organization of choice.

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