In light of the Tax Cuts and Jobs Act currently being reconciled in the Congressional Conference Committee, consider several year-end charitable giving maneuvers to capitalize on upcoming tax law changes.
Generally, tax rates will be lower in 2018 than in 2017. As a result, deductions and income deferrals are more valuable now because they reduce income taxed at a higher rate. Additionally, the Act doubles the standard deduction, making it less likely that taxpayers will receive the same benefit from a charitable contribution in 2018. In order to accelerate charitable deductions to the 2017 tax year, donors should consider the following giving strategies.
Qualified Charitable Distributions
Timing is opportune to make a Qualified Charitable Distribution from your retirement plan to charity. The QCD makes a charitable gift while reducing 2017 Required Minimum Distribution. This can eliminate the income tax otherwise due on the RMD.
How to Do It: To make your qualified distribution, contact your plan administrator and complete the qualified charitable distribution form as soon as possible.
Charitable Contributions of Appreciated Securities
Donors should consider accelerating charitable gifts to the 2017 tax year, but especially gifts of appreciated securities. Beginning in 2018, the Act requires the use of FIFO inventory to select tax lots of securities to be sold, contributed to charity, or gifted to family. This limits the ability of a donor to opportunistically give the highest appreciated lots of securities to charity and minimize gain on ungifted securities.
How to Do It: Contact your preferred charity by December 21 to leave time to process the transfer.