Deducting charitable donations trickier under new tax code

There's less incentive to itemize because standard deductions doubled

SAN ANTONIO – If you're planning to donate money to your favorite charity before the end of the year and you're counting on a tax write-off, you may want rethink your strategy.

From dropping a few bucks into a red kettle or making a sizable donation to a nonprofit, it is the season for giving.

"A third of charitable giving happens in December, and in fact, 12 percent happens in the last three days in December," said Lisa Brunsvold, vice president of development and donor services at San Antonio Area Foundation.

People are in the spirit and the perk of a tax write-off doesn't hurt, either.

But changes in the tax code make it more difficult to claim a tax deduction for your charitable donation.

Under the new Tax Cuts and Jobs Act, there's a higher threshold. The Act, enacted at the end of 2017, nearly doubled the standard deductions to $12,000 for individuals and $24,000 for married couples. 

For most people, claiming the simpler, higher standard deduction would be more advantageous than itemizing charitable and other deductions.  

But if you still want the tax break and have the financial means, there are options.

"One of the strategies that's been floating around a lot is called bundling," Brunsvold said. "That's where you might take a larger contribution and open a donor-advised fund."

With a donor-advised fund, you get an immediate tax break and make donations from the fund to your favorites charities over time. 

The San Antonio Area Foundation as well as financial advisers can assist with setting up such funds.

Bunching is a similar option. 

You simply give multiple years' worth of donations at once to beat the standard deduction and then claim the standard deduction in the other years.

Donating shares of a stock or mutual fund are other options to generate a tax break. Older Americans can also give a portion of an IRA to benefit.

Exactly how much impact the tax changes will have on nonprofits remains to be seen. Their hope is people will give from their hearts, tax write-off or not. 

About the Author: