Maximizing the tax benefit of charitable donations

With the new tax laws, it has become potentially more difficult to receive optimal tax treatment for one’s charitable donations. Married couples filing jointly now have a $24,000 standard deduction. Unless the total itemized deductions are more than $24,000, it won’t pay to itemize. Moreover, big deductions of the past for state property tax and sales tax are now limited to $10,000. Bottom line is that if you claim the standard deduction, there will be absolutely zero tax benefit to making personal charitable donations.

However, there are some ways to get a tax benefit for charitable donations even if you claim the standard deduction. If you are older than 70½, you can donate directly from your IRA to a charity. By doing this you will be able to donate money that you previously received a tax deduction on without realizing any income. Also, if you are planning to leave money to charity in your will, you may want to consider naming a charity as one of the beneficiaries of your IRA because the charity won’t have to pay taxes on those funds, whereas your children will.

If you are a business owner, the most tax-efficient way to support a charity is through charitable advertising. Purchasing pages in your favorite charity’s ad journal will allow you to fully deduct that payment as a business expense, directly reducing your K-1 income that goes on your 1040 tax return. From the charity’s perspective, it doesn’t really care if its revenue comes from personal donations or business advertising.

Finally, if you have some appreciated stock that you were planning on selling, consider donating some of those appreciated shares directly to a charity. That way you can avoid paying capital gains taxes and the charity can sell your stock without any tax liability.