The Tax Cuts and Jobs Act undoubtedly has been felt throughout the country as taxpayers and tax professionals prepare for the many new law changes. A major point of impact for individual taxpayers focuses on the changes to itemized deductions. With the passing of the Tax Cuts and Jobs Act, itemized deductions were drastically reduced, and the standard deduction for all filers nearly doubled. Accordingly, many taxpayers will no longer itemize their deductions and will instead opt for the more favorable standard deduction. Those who continue to itemize will see significant changes to the overall amount of their itemized deductions.
With state and local income tax (which includes property tax) deductions limited at $10,000 and miscellaneous 2% deductions such as investment management fees, unreimbursed employee expenses and tax preparation fees eliminated, charitable contributions will be a driving factor for individuals to be able to itemize going forward. Below we take you through some effective planning tips for charitable giving that can help you maximize the tax benefit of your donations.
Before we dive into planning for your charitable donations, let’s first go over the new rules surrounding charitable donations. Itemizers who make donations from January 1, 2018, through December 31, 2025, can deduct charitable contributions of cash up to 60% of adjusted gross income (AGI) versus the previous 50% limitation. That means if your AGI is $100,000, you can deduct up to $60,000 in cash charitable donations. All other contribution limitations remain in place, and contributions that exceed limitations can be carried forward for a maximum of 5 years.