How to bundle your charitable giving to increase tax savings

Catholic United Financial > Company > How to bundle your charitable giving to increase tax savings
Foundation News

Questions?
Feedback?
foundation@catholicunited.org

Catholic United Financial Foundation White Logo

How can bundling my charitable giving provide tax advantages?

by Robert Heuermann, Executive Director

With the new tax laws, the standard deduction nearly doubled to $24,000 (married couple) and $12,000 (single person) for 2018 and beyond. This makes the charitable deductions you used to itemize not as useful unless your total itemized deductions are greater than these new standard deductions.

By bundling a number of years’ worth of your charitable gifts, you can increase your itemized deduction even if you do not give your donations out in a certain year. By bundling the relatively large charitable contributions, in combination with other itemized deductions like mortgage interest and state & local taxes you will increase the likelihood of exceeding the standard deduction and provide you with additional tax savings. By bundling charitable giving, you can use a donor advised fund to combine several years’ worth of giving into one year and gain the maximum tax benefits available.

How does it work? As an example, donors (in this case a married couple) might normally make $14,000 of charitable donations each year. However, if they use a Donor Advised Fund (DAF), they could bundle two years’ worth of charitable giving into one year, thereby exceeding the $24,000 standard deduction and gaining an additional $14,000 of deduction ($38,000 deduction minus $24,000 standard deduction equals $14,000 in additional deduction).

…bundle two years’ worth of charitable giving into one year, thereby exceeding the $24,000 standard deduction and gaining an additional $14,000 of deduction…

In year two, they would forego making a charitable deduction, but still benefit from the standard deduction of $24,000. In year three, the process starts anew again.

The DAF allows them to make grants on their own timetable, which allows the donor to “level” out their charitable giving. This provides them the ability to still support their favorite causes each year to the amount of $14,000 that they were used to doing with their traditional giving. The money may also be invested potentially increasing the amount available for grant making. Furthermore, this technique becomes even more tax-efficient if the donors can fund the gift to the DAF using long-term appreciated marketable securities. They’ll be able to avoid paying the income tax on the appreciation on those securities, in addition to enjoying a full fair market value deduction for the gift.

If creating your own Donor Advised Fund to help you lower your tax bill, contact your local Catholic United Sales Representative. Or contact me at 651-765-6548 or email at foundation@catholicunited.org with any questions about how charitable bundling can work for you.  

Catholic United Financial Foundation does not provide legal or tax advice. For estate planning or taxation matters, you should always consult with an independent legal and/or tax advisor regarding your individual circumstances.