Philanthropic strategies under new tax law

On Behalf of | Dec 12, 2019 | Firm News

Many people in North Carolina find contributing to charitable organizations a way to help others and promote causes that they believe in. These organizations may be big or small, as with the donations themselves, but all are valuable for many reasons. The work done by nonprofit organizations often delivers essential services to those in need and the people who donate to them have often been able to enjoy a good feeling as well as a tax deduction for their contributions. 

The new tax law has changed the charitable giving landscape. As explained by CNBC, the increased standard deduction amounts has reduced the number of people who will itemize their deductions on tax returns. This, in turn, means that anyone who does not itemize deductions has donated to a charity, they lose the historical tax benefit of giving. 

However, Forbes notes that the new tax law removes the limit on what percent of a donation may be deducted so those that do itemize deductions will be able to get a deduction for the full value of their donations. 

These changes make it important for people to carefully review their charitable strategies. One option that allows people to continue supporting the causes important to them while still getting a tax deduction is called bunching. In this approach, they do not make donations every year but every few years. The donations would amount to what they would have given annually over a number of years but in a lump sum to ensure they exceed the threshold to make it worth itemizing their deductions in the year that they give.