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CFP Board Offers Tax Tips for Charitable Contributions

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Nonprofits fear that the near-doubling of the standard deduction contained in the new tax law could have a deleterious effect on charitable donations this year.

And while they could be right — since many contributions will no longer be deductible — the altruism that spurs many donations could carry the day regardless, according to Jill Schlesinger, senior CFP Board ambassador.

In a blog post, Schlesinger writes that although many donations will no longer be deductible, there are also strategies that consumers can use to get the most bang from their charitable buck.

The change comes at a time when charitable donations rose to the dizzying heights of more than $410 billion in 2017, thanks to a rising stock market, strong economy and change in the tax code. But, writes Schlesinger, “Under the new tax law, approximately 85–90% of Americans will not be entitled to deduct their contributions.”

But aSchlesinger highlights strategies available to make contributions pay off for both donor and recipient. Bundling future years’ contributions, for instance, can create a big enough pool of money to justify itemizing in the current year.

Another method is to gift appreciated securities from a taxable investment account, which allows the donor to write off the current market value — not just the purchase price — and avoid taxes on the accumulated gains.

Payments must be sent, and postmarked, prior to midnight on Dec. 31, or they won’t be counted for this year. The date on the check doesn’t weigh with the IRS, nor does a pledge that hasn’t been fulfilled. Credit card donations, too, bear watching, because the donation counts as of the date the account is charged.

Last but not least is a qualified charitable distribution from a retirement plan for those 70½ or older. QCDs allow the redirection of a required minimum distribution to a public charity. And while they don’t qualify as an itemized charitable deduction, QCDs do let donors avoid tax on the money and also help to minimize adjusted gross income as well as affecting a number of benefits like Medicare premiums.

— Check out 4 Tips to Strengthen Client Relationships Around the Holidays on ThinkAdvisor.


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