In 2018 the standard deduction increased to $24,000 for a married couple. This is great if you do not have deductions, but it changed the tax game for those that deduct a variety of things like real estate taxes, mortgage interest, and charitable gifts. Many people who used to itemize deductions are now taking the standard deduction and therefore no longer getting a tax benefit from those charitable gifts. For many people, this primarily includes the money that you give to your church every year. Here are two thoughts on how to regain some of that tax benefit in specific situations.
- If you are over 70 ½, you can send money directly from your IRA to the charity If you do this correctly, it will be sent without being taxed. Instead of taking the money out of the IRA, paying taxes on it, and then gifting to the charity and maybe or maybe not getting to deduct it from your taxable income, you can just send it directly to the charity. This may help reduce/eliminate your taxes on charitable gifts.
- If you give large amounts every year to charities, you could give several years at one time so that the total giving in a given year rises above the standard deduction. For example, if you give $15,000 each year, you could give $45,000 in a single year to cover 3 years of giving. You would then itemize that year instead of taking the standard deduction. Of course, you would need to be making large enough gifts for this strategy to be effective. If you are not yet 70 ½ and you give large enough amounts to charities, this may be an option to consider.
These ideas may or may not work for your personal situation so please consult tax and financial professionals if you need personal guidance.
By Cammie Humke, Investment Adviser at The Humke Group, Inc Located at 555 S. Randall Rd in St. Charles, IL, phone 630-584-7343
The Humke Group, Inc is an independent firm with securities offered through Cetera Advisor Networks LLC, member FINRA/SIPC. Advisory services offered through Summit Financial Group, Inc., a registered investment adviser. Summit and Cetera are affiliated and under separate ownership from any other named entity. Member of FINRA/SIPC. Opinions expressed are that of the author and are not endorsed by the named broker/dealer. All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoided any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.