Fall is a good time to evaluate your charitable giving for the year.
Since the Tax Cuts and Jobs Act of 2017 became law and significantly raised the standard deduction, fewer people benefit from itemizing deductions on their tax returns. It may be beneficial, however, for you to consider whether this year would be a good one to make a major charitable gift you’ve been considering, or to “bunch” your charitable gifts to benefit from itemizing.
Here’s what I’m talking about.
For an individual taxpayer to benefit from itemizing deductions in 2024, her total deductible expenses, including charitable contributions, would need to exceed $14,600. That number is $29,200 for married couples filing jointly. If you are either nearing that number already, or if you happened to have a year of greater than usual taxable income due to higher earnings, real estate sales, realized gains on investments, or other income, it may be worth being especially generous before year-end.
People who regularly give to charity sometimes choose to “bunch” their donations in some years by giving two or more years’ worth of contributions to their favorite organizations. This way, they benefit from an income-tax deduction, thereby reducing the cost of the gifts by the amount of their tax savings. They may also notify the charities that those contributions are intended to help for the next two (or more) years so that the organizations can plan accordingly.
Your financial advisor or community foundation can be a great resource to learn more.
Another good option for many individuals and families is a donor advised fund. This is a separate fund maintained by a qualified public charity that allows you to make tax deductible contributions to the fund and, with the approval of the sponsoring charity, grant those dollars out to other qualified public charities in the future. You can therefore contribute one lump sum to a donor advised fund this year, claim an income tax deduction for 2024, and recommend distributions from that fund to charities you wish to support over the next year or more.
Many financial institutions and investment firms offer donor advised funds through related charitable organizations. And community foundations across the country typically offer robust donor advised fund programs with the advice, oversight, and guidance of staff and volunteers who are knowledgeable about their own communities. You can use the Council on Foundations’ Community Foundation Locator to find one in your area. They or your financial advisor can be a great resource if you want to learn more.
Fall is almost upon us, and December will be here all too soon. September and October are good months to evaluate what the year will look like financially and to consider how you want to help others through your charitable giving — before 2024 is in the rearview mirror.
Disclaimer: This information is not intended as legal, tax, or financial planning advice. Readers should consult with their own professional advisors before making any charitable gift.