Tax Breaks for Charitable Giving Have Disappeared [How You Can You Help]

by Chris Vance
tax breaks for charitable giving

Tax breaks for charitable giving are disappearing. But are they really?

With the 2018 tax season now behind us, and many of your clients have found their annual charitable gifts got a lot more expensive. The 2017 Tax Cuts and Jobs Act, which went into effect for the 2018 tax year, nearly doubled the standard deduction to over $25,000 for a married couple filing jointly over the age of 65.

To write off charitable contributions, taxpayers need to itemize their deductions instead of taking the standard deduction.

Therefore, taxpayers can now itemize if the sum of their deductions exceed the amount they can write off by taking a standard deduction. In addition to a higher standard deduction, the IRS has also put a $10,000 cap on state and local tax (SALT) deductions. As a result of these changes, many experts predict that the number of itemizers will drop to under 10% of all tax filers.

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It’s hard to say what impact these changes will have on charitable giving, but far fewer taxpayers will have a financial incentive to donate under the new tax code. Now that a majority of the 2018 tax returns are in, it appears the tax reform has had a minimal change in charitable giving so far.

That said, most taxpayers didn’t fully understand how the tax law changes were going to affect them until after filing their 2018 tax returns. The big question for many charitable organizations is, how will charitable giving change in 2019? Especially now that we’ve all had the opportunity to digest the new laws fully.

How to Help Charities Maintain or Even Increase Charitable Contributions

Now, this presents a fantastic opportunity for financial professionals to educate their clients, prospects, and charitable organizations. Seniors aged 70 ½ or older can deduct some or even ALL their philanthropic contributions if done the right way. 

A required minimum distribution (RMD) is the amount of money the IRS requires us, at age 70 ½ and older, to withdraw and pay taxes on from traditional retirement accounts. Rather than clients receiving their RMD and creating a taxable event, the IRS allows for those RMDs to be redirected as a qualified charitable distribution.

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This is done by having the qualified account custodian transfer their RMD directly to a qualified charity. The result allows the client to avoid paying taxes on the redirected RMD! The IRS does place a $100,000 maximum per year on this strategy.

Tax Breaks for Charitable Giving: A Great Advisor Opportunity

I work with an advisor in Atlanta who has had tremendous success with this idea. He’s been reaching out to local churches and other charitable organizations. His offer? To host seminars or webinars for the organization’s donors to explain this tax savings strategy.

This has allowed him to get in front of large groups of potential clients at no cost to his firm. In addition to reviewing the changes to the charitable giving environment, he also capitalizes on the opportunity during his presentations to introduce how his firm and all their service offerings help families navigate retirement as efficiently and successfully as possible. What will you do to capitalize on this new tax savings strategy?

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We’re here to help you with your clients’ tax situations – regardless of the season. Reach out to your private client group, give us a call at (800) 527-1155, or visit us at
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