Doubling Up or “Bunching” Your Charitable Contributions into Specific Years

By Dean Hernan – Treasurer, CAF National Board of Directors;  Public Accountant, Katz Viola Lebenhart & Mauro, LLP; Chief Financial Officer, The Forum Group

The new Tax Cuts and Job Act is upon us, effective for the year 2018, and will bring many changes in the tax code. This new tax bill will shrink the number of households claiming itemized deductions on their tax returns due to limiting and eliminating many prior allowable tax deductions.The standard deduction will also rise to $12,000 for single tax filers and $24,000 for married couples in 2018. Both of these changes will lead to more strategizing of charitable contribution giving, especially if there is a loss of a tax savings.

One strategy to combat the new tax law is to consider doubling up or “bunching” your charitable gift giving to every other year or two out of three years.   Doubling up or bunching your gift giving may allow you to itemize your deductions in the years you give, instead of taking the standard deduction for that year.

Lets take a look at this example.  Consider a married couple claiming the maximum property and state income tax deduction of $10,000 along with mortgage interest of $10,000 per year.   They will need to have $4,001 of charitable gifts per year in order to surpass the $24,000 standard deduction threshold. (Taxpayers can deduct the higher of their actual itemized deductions or their standard deduction). If this couple normally gives $3,500 to charities annually, doubling up the contributions one year (to $7,000) and skipping any contribution the following year will have the following result:  In the year of doubling up, the couple will have itemized deductions of $27,000 ($10,000 instate and local taxes, $10,000 mortgage interest and $7,000 in charitable contributions) instead of a $24,000 standard deduction for that year and the following year will have the same $24,000 standard deduction they would have had they made their donations at their normal $3,500 per year. The doubling up resulted in reducing their taxable income by $3,000 in the year of doubling up while having the same taxable income in year two. Had they made their normal $3,500 per year in donations, their total itemized deductions for both years would have been $23,500, which is less than the annual standard deduction allowed

Not-for-profits will be facing many uncertainties under the new tax law. Doubling up or bunching your annual gift giving may be mutually beneficial for the donors as well as the not-for-profits (such as the Cooley’s Anemia Foundation).

Please consult with your personal tax advisors before implementing this strategy.  If you want to consider doubling up this year, please make sure the additional donations are made by December 31, 2018

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