Charitable Contributions: Changes with the New Tax Law
Posted on 02.15.18
By Debbie Quade, CPA, Tax Supervisor
This article was written with information available as of February 15, 2018. The article covers a code section which was included in the “Tax Cuts and Jobs Act” signed into law on December 22, 2017. The IRS is expected to release regulations and other publications to clarifying the specific provisions covered in this Act. Please consult your tax advisor for up-to-date information and to discuss how this provision affects your specific situation.
The 2017 Tax Cuts and Jobs Act (“TCJA”) includes several changes to the deductibility of charitable contributions for individuals. The following list will be helpful as you plan your charitable giving between 2018 and 2025.
- The new law continues to provide that charitable contributions to public charities and certain private foundations by individuals are deductible. However, under the TCJA the income based limitation on cash contributions to these types of charities increased from 50% to 60%. This income based limitation is generally AGI (Adjusted Gross Income) with a few modifications. This change applies to contributions made in any taxable year beginning after December 31, 2017, and before January 1, 2026. Contributions exceeding the 60% limitation continue to be carried forward and deducted (subject to AGI limitations) for up to five years.
- The 80% deduction for contributions made for university athletic seating rights is eliminated for any taxable year beginning after December 31, 2017, and before January 1, 2026.
- The exception from the substantiation requirement if the donee organization files a return that contains the same required information is repealed. Treasury never issued final regulations on this provision, and TCJA repeals it. Thus, contemporaneous written documentation for gifts over $250 will continue to be required. Taxpayers must continue to not only substantiate the value of the donation, but also whether the charity provided any goods or services in return that would reduce the value of the deduction.
- The standard deduction is increased to $24,000 for Married Filing Joint taxpayers and $12,000 for Single taxpayers. Because of this increase, many taxpayers may use the standard deduction and will not realize any (or limited) income tax benefit from charitable contributions. Taxpayers may want to consider contributing multiple years of charitable donations to a Donor Advised Fund in year one, while using the standard deduction in the other years. This staggered approach to charitable giving might help garner additional tax benefits.
Please note that there was no change to the ability to deduct as a charitable contribution the current fair market value of stock that taxpayers have held for at least one year. This most commonly applies to publicly traded securities as there is no need for a separate valuation for contributions of more than $5,000. The charitable contribution is valued at the current fair market, not the original cost basis. This allows donors to permanently exclude the gain and related tax on the stock sale. For larger contributions taxpayers should consider the donation of long term appreciated securities. Most charities are able to easily accept such donations.
Please contact your Keiter advisor regarding how the changes may affect you and possible planning opportunities to still reap some tax benefits from your charitable contributions. Email | Phone: 804.747.0000.
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- AMT Changes to Individuals and Businesses
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- Understanding the New Section 199A Pass-through Deduction
- Tax Cuts and Jobs Act Resource Guide