[This episode is part of the LGBTQ Series of the Midlife Money Gal Podcast]
Many of us in the LGBTQ Community are charitably inclined. There are a number of wonderful organizations that have supported our fight for equality for years.
The Tax Cuts and Jobs Act of 2018 changed the way that charitable contributions are treated for tax purposes. Prior to this tax law change, it was more common to itemize your deductions, including charitable contributions, on your tax return.
Now, most deductions have been eliminated while the standard deduction has been increased significantly. This has made more practical for most individuals and couples to take the standard deduction.
Charitable contributions are still able to be itemized on your tax return as long as your total deductions exceed the standard deduction.
Unfortunately many charities have been negatively impacted by these new tax law changes. Although our intent with charitable donations may not have been to also receive a tax benefit, donations have declined.
In this podcast episode, I outline a handful of charitable strategies that may make it more feasible for you to still receive a tax benefit from your charitable donations.
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(00:02): Welcome to the LGBTQ midlife money podcast. I'm Stephanie Sammons, an experienced certified financial planner and my goal is to help you take charge of your money and live your best mid life. Welcome to episode 32 of the LGBTQ midlife and money podcast. In the spirit of the Thanksgiving season,
(00:34): I wanted to share with you some charitable gifting tips from a financial perspective. Today, charitable gifting strategies have changed a bit because of the changes in the tax law, the took place from the tax cuts and jobs act of 2018 and in light of that, there are some ways to think about your charitable gifting that may continue to benefit you personally. From a financial perspective, LGBTQ folks are charitably inclined as a community. We have come together in our giving socially over the years to help organizations that support us and fight for our rights, fight for equality for us over time. And at least in my experience, I see that charitable giving is pretty important to many, many LGBTQ folks out there. And I wanted to talk about what's happening with charitable giving and how the tax cuts and jobs act of 2018 has impacted charities. Uh, there were some changes in the tax law where most people are better off taking the standard deduction on their tax return.
(02:23): Uh, the standard deduction for both single and married people has gone up pretty significantly with these tax law changes. And while taxes may not have been top of mind when you have given money to charity in the past, in order to get that tax deduction, now you have to be able to itemize in order to claim it well. If most people take the standard deduction, they are not itemizing on their tax return. And so this has had a negative impact on charities because they're not receiving the gifts that they were receiving previously since the tax law changed. And unfortunately that's, that's hurting those organizations and it has influenced behavior because we no longer have this incentive to give. That helps us financially and like I said, that may not been have been at the top of your mind but it was pretty nice to be able to make a charitable donation and get an itemized deduction for that donation.
(03:46): So the all that has been curved. However, there are still some strategies that you can implement that might make sense, especially if you are charitably inclined. And I want to talk about a handful of those strategies just so you are aware of them. The first one is called bunching and this means that rather than giving to your favorite charities every year, maybe you give every other year and you bunch together your charitable deductions in order to get to the level where you can't actually itemize and take advantage of the tax benefit of that charitable contribution. So bunching together and he need to kind of plan ahead for this, but you essentially would be accelerating your gift to the charity and just giving every two years a larger dollar amount than you would if you were giving each and every year and so on that alternate years where you're giving more money to the charity, then you can itemize on your tax return potentially on those years.
(05:09): The second strategy is if you are receiving required minimum distributions from an IRA. So most of the time that's someone who is age 70 and a half or older. And also many of you who have inherited IRAs from your parents, you may be subject to required minimum distributions as well. But there is a strategy called the qualified charitable distribution where you can directly give your distribution to the charity and bypass owing any taxes on that distribution. So that's one thing to consider, especially if you don't need the income coming out of the IRA and you want to avoid paying taxes on that income, you can give it all directly to the charity. Another interesting strategy for charitable giving is a donor advised fund. This is a fund that you can set up that lets you make a charitable contribution and receive an immediate tax break for your full donation, but you can spread out your grants to your favorite charities over time so you get the full tax break up front here. An example, you can put in $10,000 a hundred thousand dollars up front depending on what your income level is and get that one time tax deduction, but spread out your donation to the charities you support over the three years, five years, however, however long you want to do that so you don't have to give the entire amount to the charity upfront, but you just get the tax deduction upfront. That's called a donor advised fund.
(07:14): Another strategy for charitable gifting is considering gifting appreciated assets in particular stock or investment assets to charity. When you do this, and this is a good thing to think about now if you're planning to give to charities anyway, we've been in such a long bull market and investments are up and chances are in your portfolio you have some embedded longterm capital gains on some of your investments. Well when you gift that appreciated stock or appreciated investment directly to a charity, you avoid paying that capital gains tax and the charity can take the full amount and put that to work. So it's a way to avoid the capital gains tax on your investments by giving away stocks or other appreciated assets to charity. And last but not least, there are various types of trust that you can structure, especially if you are a higher net worth individual or couple. It may make sense to set up something like a charitable remainder trust that allows you to give to the charity and also receive some benefits back. So these are my charitable gifting financial tips for the LGBTQ community. It's still critically important that we support those organizations who are supporting us. I believe.
(09:08): And I think since the new tax law has kicked in, I have personally seen a decline in charitable giving because of that lost tax benefit. So hopefully this gets you thinking and gives you some ideas about how you might be able to continue giving to your favorite charities, but also get some kind of financial benefit from you've been listening to the LGBTQ FitLife money podcast. To learn more and to sign up for email list, visit LGBTQ vis life money dot. This show is for informational and educational. Please do not consider any of the content as personalized financial resume.
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