Maximize Tax Savings While Preparing Your Giving Plan

November and December are just around the corner. That means the holidays and the giving season are too. It’s also a time when people give generously to the nonprofits they love, while also (hopefully) generating some tax savings before year’s end. As with so many things, however, it’s often good to have a plan in place.

First, don’t forget that the tax law passed in 2018 raised the standard deduction for individuals to $12,000 and $24,400 for married couples filing jointly. That means in order to itemize, you must accumulate tax deductible expenses (e.g., mortgage interest, taxes, and charitable deductions) that exceed those totals.

However, if your deductible expenses do not exceed the thresholds above, you can still make charitable gifts and claim them on your taxes. But you have to plan ahead a bit.

For example, if you and your spouse have $13,000 in deductible expenses each year and you typically donate $5,000 per year to charity, you would not exceed the standard deduction threshold and therefore cannot itemize.

There is a way around this, however. Consider opening a donor advised fund at the St. Louis Community Foundation, for example, and “bundle” the amount of charitable contributions you would make over three years to fund it. In this case, that would give you a tax-deductible charitable contribution totaling $15,000 for the 2019 tax year, in addition to the $13,000 in deductions you already have.  You are then able to use your donor advised fund to make gifts to nonprofits in St. Louis and around the world at your convenience.

After three years, you can make another lump sum contribution to your donor advised fund, and take another deduction in that tax year. With this approach, you are maintaining your level of giving, and realizing a tax benefit for all of your contributions.

Keep in mind, donor advised funds can be funded using cash, appreciated securities (doing so can help you avoid capital gains taxes), life insurance policies, and even tangible property in some cases.

Regardless of your choices, don’t forget that all charitable contributions must be received by Tuesday, December 31, 2019, to qualify for the current tax year.

For more information and to learn how the Community Foundation can fit into your charitable giving plans, call or email Christine Burghoff, Director of Giving Strategies & Advisor Relations, at (314) 880-4967 or cburghoff@stlouisgives.org.