Giving to Charity: Strategies to Ensure a Tax and Human Benefit Under New Tax Law
Changes to the tax law in 2018 have taken away most people's ability to deduct charitable contributions. But there are still a few options to consider in order to give and still receive.


The Tax Cuts and Jobs Act (TCJA) went into effect on Jan. 1. It will take several years to figure out all of the winners and losers, but some of the obvious losers are universities, charities, churches and foundations. Basically, any organizations that offer a tax benefit for giving and, by extension, their donors.
Due to the higher standard deduction, the $10,000 cap on state and local tax deductions, and other changes, fewer than 10% of taxpayers are expected to itemize in the 2018 tax year. That’s down from 30% now. Without itemized deductions, most people will lose all tax benefits associated with charitable giving. So, the question is, how much do people care about the tax break? According to Charity Navigator, 12% of annual giving occurs in the last three days of the year. I’d say the answer is clear.
Possibilities for donors to consider
Fortunately, there are options for donors who would like to obtain a tax benefit for their generosity. One permits anyone 70½ or older to make a direct transfer of IRA balances up to $100,000 per year to a charity. For most donors, these qualified charitable distributions (QCDs) make it possible to net an ever-greater tax benefit because those dollars will never hit your adjusted gross income (AGI). Because you would have paid income taxes on that distribution, this strategy offers significant benefit to those who would have given that amount regardless. Added bonus: QCDs go toward satisfying your required minimum distribution (RMD). Bear in mind, though, that QCDs must come from IRAs; they cannot come from 401(k)s.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Another option, charitable stacking or lumping, is quickly emerging in the nerdy financial planning circles as the charitable strategy of the future. It’s not complicated. Instead of giving $10,000 per year over five years to a charity, you would give $50,000 in one year, taking you above the new $24,000 standard deduction and thus providing a tax benefit for your contribution. I’m going to take it a step further and say you should stack your entire Schedule A. In other words, you should make charitable contributions in years when you have significant medical expenses. This may be a luxury only for well-to-do retirees, not middle-class Americans.
Donor-advised funds
Many of these “lumped” contributions will find their way to donor-advised funds, which offer an immediate tax benefit for your irrevocable contribution. Charles Schwab and Fidelity run two of the biggest donor-advised funds in the country. They can be funded through gifts of cash or (even better) appreciated securities. The money is later directed through grants to the charities of your choice. Interest in these accounts surged at the end of 2017 as people realized that they wouldn’t be itemizing in 2018. Ironically, this will likely create competition between donor-advised funds and charities, which prefer a more consistent flow of income.
While all of these things may seem like negatives for the donees, there is a silver lining for large donors. The charitable contribution cap has been expanded as a percentage of AGI. In previous years, your tax benefit was capped at 50% of AGI. For example, if you made $1 million in 2017 and donated $600,000, you’d be able to write off only $500,000. The additional $100,000 would be carried forward to future, possibly lower-income, years. Now you can write off the entire $600,000 because the cap has risen to 60%. You’re likely to see the benefit of this through the use of some type of charitable remainder trust.
The billion-dollar problem for charities
The Tax Policy Center estimated that the House of Representatives’ version of the TCJA would reduce charitable giving by $12 billion to $20 billion in 2018. That’s billion with a “B.” That estimate does not consider the likely decrease in charitable giving that will result from the doubling of the estate exemption to roughly $11 million per person. Our firm is receiving many calls from nonprofits seeking guidance for educating donors. If you work in the fundraising world, it behooves you to make such education a top priority.
In Simon Sinek’s book Start With Why? he argues that it doesn’t matter what or how a person or company does something. What really matters is why they do what they do. The why is tied to emotions, while the what and how are tied to logic. Think about why you give to the nonprofits on your list. I have seen two family members deal with Parkinson’s disease, so the Michael J. Fox Foundation is my go-to at the end of the year. Of course, I enjoy a tax benefit for donating (or at least I used to), but it is not the reason why I do it. To be honest, though, if I can deduct part of my contribution, I’m likely to write a larger check. These organizations and their donors must figure out the smartest ways to adjust to the new tax landscape so that their causes do not suffer.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.
-
Your State Wants to Help You Save for Retirement. Here's How
Maximize your side hustle by saving for retirement through a state auto-IRA. You may even get matching funds from a federal program in 2027.
-
Wages Aren't Keeping Up With Inflation: A Financial Adviser's Tips to Bridge the Gap
While we can't control inflation, there are some simple things each of us can do to help keep our heads above water.
-
Wages Aren't Keeping Up With Inflation: A Financial Adviser's Tips to Bridge the Gap
While we can't control inflation, there are some simple things each of us can do to help keep our heads above water.
-
New Rules, New Opportunities for Student Loans: An Expert Guide to Preparing for What's Next
Major changes are coming to federal student loan rules, so it's a good time for borrowers to understand how these shifts will impact their financial planning.
-
Gray Divorce Can Throw Your Retirement a Curveball: What to Know
If you're entering retirement and going through a divorce at the same time, you've got some work to do to shore up your long-term financial security.
-
I'm a Real Estate Investing Expert: Optional 721 UPREIT DSTs Can Be the Best of Both Worlds
Before investing in any 721 UPREIT exchange, look for one that offers a straightforward, investor-friendly exit.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)
An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client Reviews
Financial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop Investments
Truck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.