Many people in North Carolina make donations to charities at different times in the year. Some of these donations may be modest while others may be more substantial. In the end, however, they all add up to help important causes. Consumers should feel good about making these donations and, for many years, they often enjoyed the ability to deduct the donation amounts from their tax returns. This is still possible but the manner in which this may happen is quite different now that the Tax Cuts and Jobs Act has gone into full effect.
As explained by Forbes, a person only benefits from a tax deduction if they itemize their deductions. The newly increased standard deduction of $12,000 for individuals and $24,000 for couples has reduced the number of taxpayers filing itemized returns. This essentially eliminates the deduction benefit for many charitable donations as it only makes sense to itemize if the total amount exceeds the standard deduction.
CNBC explains that there are ways to continue giving while still enjoying the tax deduction benefit. One of these is a strategy referred to as bunching. Instead of making donations on an annual basis, a taxpayer saves up the amount they want to donate over two or three years, for example, and makes a larger donation in one year. In that year, they itemize deductions while they claim the standard deduction in the other years.
There are special funds called donor advised funds that work very well with a bunching strategy and have grown in popularity as more people seek ways to make their charitable giving count.