Ask The Expert: Year-End Major Gifts
Since 2018 is the first year where the new Tax Jobs and Cuts Acts of 2017 (“Act”) has come into effect, as the year comes to a close it becomes imperative to take a renewed look at one’s tax and estate planning including one’s charitable giving. Three quick ideas of how to maximize year end planning: 1. Bundling charitable deductions – if a taxpayer’s income does not justify itemizing deductions, he or she can utilize a charitable donation deduction by “bundling” charitable giving by giving a larger amount in one year and less in the next. By doing so, one can at least itemize every other year. In this way one who is charitably minded can still give without losing an often-valuable deduction. 2. A lesser known aspect of the Act is one that can now benefit those who have children attending private school by helping with saving for children’s educational expenses. Prior to the passing of the Act, a 529 Plan or “qualified tuition program” only allowed for tax-free distributions to be spent on a child’s higher education. Now, 529 Plans can allow for tax-free distributions from the 529 Plan for a elementary and high school expenses as well. However, it is important to be mindful that the $10,000 limitation of a deduction per beneficiary and per taxable year on cash distributions remains the same. 3. For those over 70 ½ years old who are required to take IRA Required Minimum Distributions which are income taxable one can avoid such income tax liability, if by year end, they contribute such distributions to a not-for-profit charitable organization. While you will not receive a charitable deduction, it will be a wash since the income is no longer taxable. Of course, these are just a few ideas and one should consider some of the other myriad of ways to maximize tax savings in light of the Act as well as one’s personal objectives and goals.
The tax information provided is general in nature, and should not be construed as legal or tax advice. Please consult with a tax, legal, and accounting advisor before engaging in any transaction.