Deducting charitable donations under new U.S. tax law

Question

I usually donate about $20k to charities every year, and I don't have many other deductions to claim. Given that the new tax law doubles the standard deduction to $24k, I effectively don't get tax benefits from my charitable donations anymore because I don't have enough deductions to itemize.

Are there any creative loopholes to get around this so that when I donate to charity I reduce my taxable income? I know that one quasi-solution is to save up my charitable donations for several years and then give away a bunch of money within the same tax year so that I surpass the standard deduction in that year. But that's not good for the charities.

Are there any other ways to get a tax benefit from charitable donations under the new law? I own a small business, in case that provides any opportunities (though I gather that I can't write off cash donations made in the name of the business).

Answer 1

I’m in the same boat as you. Charitable contributions make up the majority of my itemized deductions, and I probably won’t be itemizing next year. Here is how I look at it:

If I end up taking the standard deduction, instead of deducting my charitable contributions, I get to deduct more than my charitable contributions. That’s a better deal for me than if the standard deduction had stayed below my level of giving.

Even before the new tax reform laws, I don’t give to charity solely for the purpose of getting a tax deduction. (Giving $1 only so that I can get $0.25 back is not rational.) I give for other reasons, and those reasons haven’t changed with the new laws.

Answer 2

Probably the best approach which can work very well depending on your cashflow and the giving in question (whether it's time sensitive or not):

• 2018: save all $20k in the bank
• January 1, 2019: give all $20k to charity (from 2018)
• 2019: give another $20k
• Dec31, 2019: (optional) give another 20k
• 2020: give none

This means you will take the standard deduction in 2018/2020 and itemize $60k in 2019.

You can sometimes put property taxes into this too.

I've saved a ton on taxes using this even before the new tax code with this approach and will likely prioritize it even moreso now that the standard deduction increased so much.

You briefly mentioned this as "save a few years" but there's no reason to save a few years. While you "late load" charitable giving in 2018, you preload all your 2020 so depending on the recipient in question it may be a neutral cash flow option.

If you are particularly worried about cashflow implications for the charity and can afford it you could move the entire thing up a year and just give $40k this year (the 2019 giving at end of year 2018) which will mean the charities see the money at the same pace. Depending on scale of the recipient you may want to give them a heads up (ie if you donate 20k to a charity with a 100k budget) that your end of year 2018/2019 donation is intended to be your 2019/2020 donation.

Answer 3

A donor advised charity fund can allow you to set aside several years worth of charity and then give donations whenever you wish.

For example you can put 40-60k in the fund during a single tax year and write it off then. As the next few years progress, you can donate the money whenever you wish.

Answer 4

Giving varying amounts to the charity probably isn't a problem for them, unless they're small. But if you want to avoid that, there are various loopholes with loans. If the charity is willing to play along, you can "loan" them money each year, then forgive several years of loans at once. You can then claim the amount of the loan as a charitable donation for that year. You might be able to set up a foundation, "loan" money to the foundation, have the foundation then give the money to charity, and then forgive the loans. But you should probably check with a tax expert to see if the IRS would call shenanigans on that.