This article was published in the New Haven Register on October 27, 2018.
Americans are a charitable bunch: Donors gave more than $410 billion to charitable organizations in 2017, marking the first year that donations exceeded the $400 billion mark, according to the Giving USA Foundation.
That marked a 5.2 percent increase over the $389 billion given in 2016, and the foundation attributed the jump to a booming stock market and economy. While the economy is still powering ahead, many top charitable groups are worried about a potential fall-off in donations this year resulting from changes to the nation’s tax laws.
The Trump administration’s Tax Cuts and Jobs Act left the rules for deducting charitable donations in place. However, those rules only apply if you itemize deductions on your tax return, and far fewer people are expected to itemize this year. That’s because the Act doubled the standard exemption, meaning you may find it more advantageous to take the exemption than to itemize.
There still are many ways to make your charitable donations count on your bottom line, and a financial planner can help you decide which strategies make the most sense given your overall financial planning picture.
For example, you can choose to “bundle” deductible expenses including charitable donations in a way that allows you to benefit from itemizing every other year. In other words, make larger donations one year and smaller donations the next, so that your itemized deductions may exceed the standard deduction in those years that you make large donations.
Another strategy is to make donations consisting of highly appreciated assets, such as stocks that have gained in value. You won’t owe capital gains taxes on the appreciated amount, and if the donation is large enough you may, again, be able to itemize.
Typically, about half of the year’s total donations to charities are made during the five weeks between Thanksgiving and Christmas, so you may want to start thinking now about what causes mean the most to you. Your decisions are important because 70 percent of donations are made by individuals, with the rest coming from bequests (9 percent), foundations (16 percent) and corporations (5 percent), according to Giving USA.
Looking for ideas? Last year, 31 percent of donations went to religious organizations, historically the largest type of recipient, followed by 14 percent to education, 12 percent to human services, 11 percent to foundations, 9 percent to health, 7 percent to public benefit, 6 percent to international, 5 percent to arts and humanities, and 3 percent to environment/animals. The only category to experience a decrease was international charities, down 4.4 percent.
Finally, be sure that the charities you choose are quality organizations that spend your donated money wisely. Several watchdog groups, including charitynavigator.org and give.org, grade individual charities on their financial status, past filings with the Internal Revenue Service, and experiences of previous donors. The best-run charities spend 80 percent to 90 percent of donations on their cause, with the rest going toward administrative, salary and fund-raising expenses.
Eric Tashlein is a Certified Financial Planner professional and founding Principal of Connecticut Capital Management Group LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through www.connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor. Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors Inc., A Registered Investment Advisor. Cambridge Investment Research Inc., and Connecticut Capital Management Group LLC are not affiliated.