Contact: Janelle Julien
Tel: (202) 822-0729
Tax Strategies for Optimizing Charitable Donations
Maximize the impact of your charitable donations on #GivingTuesday and beyond
Washington, DC - December 3, 2019 — The National Association of Enrolled Agents encourages everyone to make a charitable contribution on #GivingTuesday, December 3.
Charities have been receiving fewer donations this year as a result of recent tax laws that eliminated or sharply reduced the tax benefits of charitable giving for many Americans. The standard deduction claimed by individuals or couples nearly doubled, meaning fewer people will itemize their deductions. In order to deduct charitable contributions from your taxes you must itemize.
NAEA offers the following tax tips to help you maximize the impact of your charitable contributions while complying with the recent changes in the tax laws.
Bundle Your Donations
One way to surpass the new standard deduction of $12,000 for single filers and $24,000 for couples is to save money over time and donate every two or three years instead of every year. One popular way to do this is by donating to a donor-advised fund (DAF). Contributing to a DAF qualifies you to receive tax benefits now, enables your donation to grow tax free, and gives you the ability to decide later how you wish to make grants from that fund to qualified charities.
Retirees: Make a QCD from Your IRA
Taxpayers aged 70.5 years or older may make a qualified charitable distribution (QCD) from their IRA directly to a charity in lieu of taking a required minimum distribution (RMD) from that IRA each year. Using a QCD enables one to reduce his or her taxable income by the amount donated, up to 50 percent of one’s adjusted gross income. Making a QCD may also enable some taxpayers to lower or eliminate capital gains taxes they would otherwise pay if the RMD from their IRA would have moved them into a higher tax bracket.
If You’re Feeling Especially Generous
The limit on charitable deductions has increased from 50 percent to 60 percent of your adjusted gross income. While donating more than half of your income to charity may not be a practical option for most, charities will certainly appreciate the largesse of those wealthy or generous enough to donate at such levels. Similarly, your college or university will appreciate your purchase of season tickets so you can entertain clients at campus sporting events. However, the cost of those tickets no longer qualifies as a business entertainment expense.
Don’t Forget the Basics
Make sure the organizations to which you donate are tax-exempt. Use the tax-exempt organization search tool available on the IRS website. You may also confirm an organization’s status by calling the IRS at 1-877-829-5500, but using their online tool is generally faster.
Charity Navigator is another great resource for learning about the financial health, accountability, and financial transparency of a given charity. Charity Navigator provides independent evaluations of more than 9,000 charitable organizations. They also provide lists of specific charities working to provide aid to those impacted by natural disasters. For example, click on these links to access lists of highly-rated organizations providing relief for the California wildfires and Hurricane Dorian.
Hire a Licensed Tax Professional
An enrolled agent or other licensed tax professional can help you maximize the impact of your charitable contributions by helping you understand the impact of the new tax laws. Visit the free “Find a Tax Expert” directory at eaTax.org to find an #EnrolledAgent near you.
About the National Association of Enrolled Agents
The National Association of Enrolled Agents (NAEA) has been powering enrolled agents, America's Tax Experts®, for more than 45 years. NAEA is a nonprofit membership organization composed of tax specialists licensed by the U.S. Treasury Department. NAEA provides the networking, educational opportunities, programs, and services that enable enrolled agents and other tax professionals to excel beyond their peers. Enrolled agents are the only federally-licensed tax practitioners who both specialize in taxation and have unlimited rights to represent taxpayers before the Internal Revenue Service. To find out more, visit www.naea.org and follow NAEA on Facebook and Twitter.