The new Tax Reduction and Employment Act (TCJA) is removing tax barriers for taxpayers with charitable will. However, the proposed new legislation “Charity Donation Deduction” may increase donor traffic if approved. The bipartisan bill, which was launched on May 11 by Chris Smith (R-NJ) and Henry Cuellar (d-TX), will allow charitable non-retailers to deduct.
According to TCJA some sub-deductions were reduced or suspended between 2018 and 2025, while double deductions (charitable tax deductions 2018) were made to 12,000 individual taxpayers and 24,000 joint taxpayers. Following these changes and related changes, it is expected that the taxpayer has deducted many of the selection criteria for deductions.
Although the charitable donation deductions have not been changed by the TCJA, increasing the number of taxpayers claiming deductions (charitable tax deductions 2018) may discourage charitable donations in 2018 and beyond. Of course, non-profit communities are concerned about the impact on income.
The new bill directly allows charitable donations to deduct the “above the line” to solve the problem is available, taxpayers choose item by item or not. This may hit the nonprofit sector. The amount that can be deducted is not subject to the proposed legislation.
“Charity organizations, including churches, synagogues and other religious entities, provide services to our society in poverty, and I am connected to a tax policy that enhances their ability to serve our society,” said Smith in a press release. “The generous sponsorship of Americans for charity, we want to make sure everyone has the support they need to continue to be generous in charity and philanthropy.”
“It’s always important to give back to the community,” adds Cuellar. “The two party bills not only encourage us, but also help our neighbors, which also ensures that taxpayers can benefit from charitable donations if they decide not to detail their interpretations. I am happy to support this bill that will encourage charity action.”
Regardless of the outcome of the proposed legislation, you can advise your clients to use existing laws to maximize the tax incentives for donations. For example, as a result of TCJA, these four strategies may be appropriate.
- Grouping: Just take out your charitable donations more than you intend to deduct item by item, while ignoring or reducing the number of donations in the following years. For example, if you have already planned a gift in 2018, then increasing taxes at the end of the year may be more generous.
- Fund Donor Advice: Recommend a fund with a donor (DAF), you can make a lot of initial contributions this year and get a valid interpretation. The DAF will then allocate the money to their favorite charity for a period of time. This has the same practical effect as the grouping.
- Property donation: This technology has long been a major part of the rich. By specifying that its value has increased, such as the capital gains of works of art or other collectibles, it is often possible to deduct the current fair market value of the property, not its original cost. Therefore, the deduction is increased while avoiding capital gains tax.
- Rolling-up of the Irish Republican Army: Taxpayers aged 70 and over can transfer directly from the Irish Republican Army to a $100,000 tax-free charity. Although not eligible for deduction, the distribution does not require taxation, and reinvestment can meet the IRS allocation requirements.
Do some of these strategies make sense to your customers? If there is, explain the possibility of tax reduction.