Strategies to Keep Your Deductions
The 2017 Tax Cuts & Jobs Act (TCJA) will likely simplify filing for many taxpayers – but if you’ve traditionally deducted charitable gifts, you may have a new headache this tax season.
Because the TCJA nearly doubled the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly, the threshold for itemizing deductions is much higher than it used to be. Thus, many taxpayers are understandably concerned about losing the tax deductions associated with their charitable gifts.
Here are two strategies that may help you keep your deductions under updated tax laws:
Strategies to Consider: Bunching and Donor-Advised Funds
Bunching is the grouping of multiple years’ worth of charitable gifts into a single year. By consolidating charitable gifts, you can accumulate enough deductible expenses to qualify for itemized deductions. You can take the standard deduction in the following year. Meanwhile, a donor-advised fund is a type of investment account that allows you to make gifts to a charity.
Watch this short video to see how these strategies could help you retain your deductions:
By bunching these deductions on their 2018 taxes, the couple cleared the threshold, was able to itemize deductions and retained the tax benefits of their charitable gifts.
How Could This Impact Your Financial Plans?
It’s our job to review and clarify tax legislation so our clients understand how recent changes could impact their broader financial picture. Contact a Baird Financial Advisor to learn more about how changes to the tax code could impact your charitable giving or overall financial plans. Not a Baird client? Find a Baird Financial Advisor.
Baird does not provide tax or legal advice. Please consult your legal or tax professional for specific information.