by Robert Heuermann, Executive Director
If you are like most of us, you recently finished filing your taxes for 2017. The old rules were still in play, so the effects of your charitable giving were probably well known to you. But now as you look toward filing your 2018 taxes, all the rules have changed. Many of these changes may affect your charitable giving and how it changes your tax liability. This year will have a significant learning curve for almost every taxpayer no matter your income or previous deductions. Here are a few thoughts about the changes and how you can take advantage of them to potentially lower your tax bill.
If you no longer itemize deductions, you may not be able to use your charitable deductions to lower your taxes. Many donors are “bundling” a few years’ worth of their charitable giving into a Donor Advised Fund (DAF). The full tax deduction is available for the entire amount placed in a DAF in a single year. The donor can then make annual distributions to charities over many years on their own schedule from the Fund. This allows for a large amount to itemize in a single year while providing many years of future charitable distributions. An added benefit is that the Fund balance grows tax free each year, so you have even more to give to your Church, school or the charities you choose. Catholic United Financial Foundation Funds are conservative, Catholic, and support our Catholic community.
If you are 70 ½ years old and have a traditional IRA, you are likely required to take a minimum distribution each year, which is fully taxable. Did you know that you can direct your Required Minimum Distribution (RMD) from your IRA to the charities of your choice and pay zero tax on the distribution? If you are taking funds from your IRA and also making charitable donations in the same year, you should be making Qualified Charitable Distributions from your IRA and avoiding paying taxes on these distributions.
All the policy premiums paid into a Charitable Life Insurance Policy are tax deductible to the fullest extent of Internal Revenue Service (IRS) rules. Funding a single premium Charitable Life Insurance Policy can provide a significantly larger future contribution to your Church or charities you choose, with tax savings to you today. The leverage of using a Charitable Life Insurance Policy may increase your donation by up to 50% or greater depending on health and age of the insured. You can even use your IRA to make a tax-free donation to serve as the premium for the charitable policy.
Even though all the rules have changed, you can still make a great impact on the charity or church you care about by using these strategies. As implied with Charitable Life Insurance, you can even use them together to maximize your impact while minimizing your tax bill.
Contact your Catholic United Sales Representative to learn more. Or contact me directly at firstname.lastname@example.org or at (651) 765-6548. We would be happy to show you how to pay less on your taxes and give more than you thought possible to the Church or charities of your choice.
NOTE: Catholic United Financial and the Catholic United Financial Foundation are not permitted to provide tax or legal advice. The information in this article is based on our understanding of the laws currently in effect. You may wish to consult your personal tax or legal advisor with questions about your specific situation.