Charitable Giving Under the New Tax Plan

The new tax plan recently approved by Congress nearly doubles the standard deduction for individuals and families. While this aims to simplify the filing process for most Americans, it could complicate giving strategies for many who regularly deduct their charitable contributions each year.

One strategy being considered is “bunching,” where donors double up on contributions every other year to beat the standard deduction. Bunching, however, has the potential to be harmful to charity or non-profit organizations who rely on a steady stream of donations for annual operations.

This is where a donor-advised fund can help. A donor-advised fund allows contributors to donate money and take a tax deduction in the same year, and then distribute the money to selected charitable organizations over time.

A recent article in the New York Times explains it this way:

“Someone could “bunch” several years of donations to a donor-advised fund into one year, and take the tax deduction, but then have the fund pay out the gift annually in equal amounts. The charity would get the same amount each year, even in years when the donor did not itemize deductions.

The donor does not directly control the money once deposited, but tells the fund’s administrator how to spend it, by selecting an eligible charity and an amount to be donated. The money may also be invested depending on the distribution to the nonprofit group, potentially increasing the amount available for contributions.”

A donor-advised fund is an easy and cost-effective way to support your favorite nonprofits anywhere in the country, at any time you choose. Community Foundation staff will confirm that your recommended charities meet IRS requirements and then issue grant checks to the organizations. Donors retains an advisory capacity in recommending grants from the fund.

Contact us today to learn more about establishing or contributing to a donor-advised fund.