When the new tax law was enacted last December, taxpayers had little time to act before the end of the tax year. While RBC Wealth Management does not provide tax or legal advice, now is a good time to look at how the new rules may affect your charitable giving for 2018 tax-planning purposes.
The current law retains seven ordinary income tax brackets, lowering the rates and thresholds for most brackets. The current law also nearly doubles the standard deductions for taxpayers who do not itemize their returns.
Although a lower potential tax liability and a higher standard deduction may reduce the tax incentive for some taxpayers to make charitable donations, you may still wish to share your generosity with favorite causes. Indeed, charitable giving by Americans increased 5.2 percent in 2017 to a record $410 billion, according to a recent report published by the Giving USA Foundation.
If 2018 has been a successful year for your portfolio, you may wish to explore the benefits of contributing to a donor advised fund (DAF).
A DAF is often used by donors who wish to maximize their current income tax deductions. It is a gifting vehicle created by a “parent organization” such as a community foundation or another qualified 501(c)(3) non-profit organization. The parent organization provides a document (often at no charge) in exchange for an irrevocable relationship. While you may choose what charity to support, you have few responsibilities beyond donating funds and suggesting how they be used.
Your cash contributions can be deducted up to 60 percent of your adjusted gross income (AGI). If you donate appreciated securities, such as stocks, you can usually deduct up to 30 percent of your AGI. And you are not limited to a “onetime” donation — one of the key benefits of a DAF is it allows you to make additional contributions from year to year, which can help you generate additional income tax deductions.
Throughout your lifetime the DAF allows you, or your designee, to make ongoing, non-binding recommendations to the fund regarding how much, when, and to which charities, grants from the fund should be made. You or your designee can also offer advice to the fund as to how contributions should be invested.
If you are looking for a method of providing long-lasting contributions to charitable organizations through a tax-advantaged solution, take a close look at donor advised funds.
To learn more about donor advised funds, please contact your RBC Wealth Management financial advisor. Or use the locator tool to find an advisor near you.
RBC Wealth Management does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in connection with your independent tax or legal advisor.
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