HOW TO ACTUALLY SAVE TAXES WITH A GIVING FUND
There were two important changes in the tax law starting this year - (1) the IRS put a limit of $10,000 deduction for state and local taxes (income tax and ad valorem tax) and (2), they raised the Standard Deduction (for a couple filing jointly) from $12,000 to $24,000.
RESULT: You can “bunch” your charitable giving every other year and then take the Standard Deduction every other year and save from $2,000 to $5,000 in taxes every other year.
HERE IS HOW IT WORKS: Assume you are giving $20,000 per year to your church plus several other charities. So you have $20,000 in charitable deductions for 2018. On Dec. 31st, mail us a check for another $20,000 to put in your giving fund to cover your 2019 charitable giving. So you now have $40,000 in charitable deductions for 2018. You make no charitable gifts in 2019, but use the $20,000 extra in your fund to continue your giving to your church and other charities you support. When you file your tax return for 2019, all you can take is the $10,000 deduction for state and local taxes, plus $4K-$6K for mortgage interest (or whatever your actual mortgage interest happens to be). But instead of itemizing your deductions, you take the $24,000 Standard Deduction and pickup an extra $8K-$10K in deductions. At the 24% tax bracket, that amounts to about $2,000 in tax savings. If you have paid off the mortgage on your house, you will pick up an extra $14,000 in deductions. At the top tax bracket, that is over $5,000 in tax savings. And I doubt that good old Uncle Sam will miss it!!!! By the way, the math works out the same whether you are giving away $10,000 or $100,000 per year.
As we have said before, we DO NOT like to give tax advice, so please check with your CPA before doing this. Please call us if you have any questions.
Jim Bradford, CAP ®
400 Office Park Drive Suite 201
Birmingham, AL 35223 | ncfgiving.com/alabama