New Tax Law and Charitable Giving

[gcgang]

https://www.cnbc.com/2018/12/18/how...ritable-donations.html?recirc=taboolainternal

Article states almost half of charitable givers who currently get a tax deduction will lose their deduction with the new tax law. Fears of charities that giving may decline are mentioned, as is the strategy of "bunching & skipping" annual donations.

For givers over 70 1/2 who take RMDs from their IRAs, the charitable option becomes even more attractive. That may appeal to me down the road as my DAF, funded during my high income years, becomes exhausted.

 

[gerntz]

Two things: 1) With lower tax rates, the income deductions - they aren't tax deductions - aren't worth as much, and 2) The income deductions lost for those folks are covered by higher standard income deduction; i.e., in many cases the standard income deduction is so large that they get a bigger total deduction if gifting the same amounts than they would have under that old law.

Really, are people gifting because they value the charity or because the want an income deduction?

 

[Greg V]

Really, are people gifting because they value the charity or because the want an income deduction?

I think it's a bit of both.

 

[Souschef]

https://www.cnbc.com/2018/12/18/how...ritable-donations.html?recirc=taboolainternal
For givers over 70 1/2 who take RMDs from their IRAs, the charitable option becomes even more attractive. That may appeal to me down the road as my DAF, funded during my high income years, becomes exhausted.

Absolutely!I do a lot of giving from my IRA, as that part of the RMD is not taxed. QCD's to me are an absolute necessity.

 

[VanWinkle]

Absolutely!I do a lot of giving from my IRA, as that part of the RMD is not taxed. QCD's to me are an absolute necessity.

+1 QCDs are the best thing for charities to come along for many years.

 

[Midpack]

Really, are people gifting because they value the charity or because the want an income deduction?

I think it's a bit of both.

+2. Some people will contribute less due to the change in standard deductions, whether it’s significant or not is TBD.

Some recent discussion here http://www.early-retirement.org/forums/f28/2018-charitable-contributions-95218.html.

 

[Fishingmn]

We did reduce ours as we will no longer be able to itemize.

 

[Lewis Clark]

... Really, are people gifting because they value the charity or because the want an income deduction?

I think most people gift primarily to support the cause, and take the deduction as an extra benefit for themselves.

Making a donation with a *primary* goal of benefiting from the tax savings makes no sense mathematically.

 

[Hermit]

https://www.cnbc.com/2018/12/18/how...ritable-donations.html?recirc=taboolainternal

Article states almost half of charitable givers who currently get a tax deduction will lose their deduction with the new tax law. Fears of charities that giving may decline are mentioned, as is the strategy of "bunching & skipping" annual donations.

For givers over 70 1/2 who take RMDs from their IRAs, the charitable option becomes even more attractive. That may appeal to me down the road as my DAF, funded during my high income years, becomes exhausted.

From the article:

Using a qualified charitable distribution lets you reduce your taxable income by the amount donated, up to 50 percent of your adjusted gross income, according to the National Association of Enrolled Agents.

I have never heard this about a QCD before. The way I read this statement, if you have a gross income of 50K, the most you can give in the form of a QCD and have it not not be taxed is 25K. I thought the only restriction was up to 100k could be given in a year and would count as not taxable.

 

[Choices]

We will give the same, maybe a bit more. The charities that we support are important to us. I urge my kids to donate rather than buy me gifts.
Most folks do not realize how tax deductions work, the same folks who never figured out the “ progressive” part.

 

[FireFool]

My charities will have received less in 2018 because I doubled up in 2017 - effectively pre-giving for 2018. I'm planning on giving earlier in 2019 to help smooth their revenues a bit, not that in the large scheme that my gifts are any recognizable percentage to any charity.

 

[JoeWras]

My charities will have received less in 2018 because I doubled up in 2017 - effectively pre-giving for 2018. I'm planning on giving earlier in 2019 to help smooth their revenues a bit, not that in the large scheme that my gifts are any recognizable percentage to any charity.

This is where a Donor Advised Fund helps. You can bunch your giving while evening out the grants.

This is our last year working so we gave heavily to our DAF. We have charitable giving covered for the next four years. Good thing too since it looks like we may be running into sequence of return issues in our new retirement.

 

[harllee]

I am giving less this year because I doubled up on charitable giving last year last year. I think charitable giving will be down this year--some because many people like me doubled up last year and some because people will not be itemizing. I am on the Board of a charity and it looks like for that charity giving of that organization will definitely be down this year. That charity is working hard to tap the QCDs but many of their donors are not yet old enough to do QCDs. DH has a couple more years before he can do the QCD (and I have 3 more years) so we are telling some charities that we are going to limit our giving until we can do the QCDs and then we will up our charitable giving to make it up. Right now charitable giving presents a cash flow problem for us since most of our remaining assets are in traditional IRAs.

 

[Bir48die]

Sad that helping an organization would come down to whether you could deduct it or not. I'm a steady giver myself and have not adjusted anything

 

[Teacher Terry]

We give regardless of tax deductions.

 

[JoeWras]

We'll give too, short of them making any charitable giving an actual penalty by law. In the meantime, since there is still a deduction after the standard number, we'll take advantage of it through bunching.

The fact is this will affect some people. Just as some people insist the mortgage deduction is the only reason they'd buy a house.

One more example, which is most disturbing. Because of minimums and out of pockets for medical care, I've seen people not go to the doctor even when they suspected something serious, simply because "they'd have to pay" for that $150 doctor visit. This happened a lot after many plans were changed from complete pay or small co-pay to a higher deductible model. Meanwhile, they drive to their Lexus dealer and fork over $1000 for simple maintenance. It is the strange way humans act.

 

[gerntz]

Sad that helping an organization would come down to whether you could deduct it or not. I'm a steady giver myself and have not adjusted anything

Tax laws affect spending, giving, investing, earnings & where people choose to live. Being oblivious gets you killed.

 

[RunningBum]

Are some people giving less than normal because of the loss of the tax deduction, or were they giving more than normal before because of the tax deduction?

 

[38Chevy454]

Tax laws affect spending, giving, investing, earnings & where people choose to live. Being oblivious gets you killed.

Just playing Devil's advocate, there are also a lot of other reasons that are not tax related, such as personal, family, familiarity, preference; for people to use in their decisions. I do agree that tax laws can have an effect for those that are aware of the ways taxes affect. I still do charitable, although with new tax laws and also now being retired, there will be no Sch A deductions this year. Just taking the std deduction, for almost the first time since started my working career.

 

[scrabbler1]

Are some people giving less than normal because of the loss of the tax deduction, or were they giving more than normal before because of the tax deduction?

For me it's the latter. I was due to make another clothing donation because, as I described in that "purge" thread, my closets were getting too stuffed. I made it late last year while I could still get some value from the donation via itemized deduction, something I don't expect to take again anytime soon.

 

[gerntz]

Just playing Devil's advocate, there are also a lot of other reasons that are not tax related, such as personal, family, familiarity, preference; for people to use in their decisions. I do agree that tax laws can have an effect for those that are aware of the ways taxes affect.

I think we're in agreement that there are things other than taxes that may also affect financial decisions. But I think tax laws have an effect also on those that aren't aware that they do. And I imagine that's most.

 

[MarieIG]

Are some people giving less than normal because of the loss of the tax deduction, or were they giving more than normal before because of the tax deduction?

Don't know what other people are doing. Did not give because of tax deduction before, but did itemize it; and at least for 2018, did not reduce charitable giving.


At this point it appears that our disposable income shall be reduced (due to the loss of SALT deductions) so we have to cut in other areas, including retirement savings, to keep our giving consistent.

 

[Montecfo]

Under the Bush-obama tax cuts I believe the post analysis was giving did not drop much despite the reduction in tax rates. People committed to giving continue to give.

We contributed several years of giving to our donor advised fund this year, as we expect our tax bracket to be far lower in 19, though we will still itemize.

 

[athena53]

Tax laws affect spending, giving, investing, earnings & where people choose to live. Being oblivious gets you killed.

I agree. I have $X to spend every year (barring emergencies). If taxes increase substantially because I can no longer deduct charitable donations, cutting back charitable donations to pay the extra taxes makes sense to me.

This doesn't apply to me right now; I'm single and have enough deductions that can't be shifted (property taxes, state taxes, a little mortgage interest, OOP medical and dental) to exceed the standard deduction so charitable deductions still decrease my taxable income. My taxes, unfortunately, ARE going up under the new laws but I'm keeping up my commitments to charity.

 

[gerntz]

I agree. I have $X to spend every year (barring emergencies). If taxes increase substantially because I can no longer deduct charitable donations, cutting back charitable donations to pay the extra taxes makes sense to me.

This doesn't apply to me right now; I'm single and have enough deductions that can't be shifted (property taxes, state taxes, a little mortgage interest, OOP medical and dental) to exceed the standard deduction so charitable deductions still decrease my taxable income. My taxes, unfortunately, ARE going up under the new laws but I'm keeping up my commitments to charity.

I'd like to understand how your taxes can be going up when rates are down some & you don't have enough deductions to exceed the Std deduction.