For many donors, the confusion about the Tax Cuts and Jobs Act of 2017 passed by Congress in December 2017 involves what can and cannot be itemized. Even with the new tax law in place, donors can still make a difference by giving to Bethesda. If you’re confused about what the tax reform means for donors, continue reading for more insights.
Highlights of the 2017 Tax Reform Bill and Charitable Giving
The new tax law nearly doubles the standard deduction to $12,000 for individual filers and $24,000 for married individuals filing a joint return. Many critics say this will eliminate the incentive to make charitable donations among middle-class Americans, who will be without a tax break when their total number of deductions do not reach the higher threshold.
On the other hand, because the economy currently is strong, donors may opt to exceed the standard deduction threshold and secure the benefits of itemizing. After all, taxpayers can itemize deductions, including charitable gifts, if they choose to not to take the standard deduction.
Nothing has changed the tax law for donors age 70 ½ or older who want to donate gifts from their Individual Retirement Accounts (IRAs). This gift can help you fulfill your required minimum distribution, and the Internal Revenue Service will not consider it taxable income. You can continue to make tax-free charitable gifts up to $100,000 directly from your IRA and still take the standard deduction – getting the best of both worlds (fulfilling your required minimum distribution and receiving a deduction).
Other Changes From the Tax Cuts and Jobs Act of 2017
Changes resulting from the Tax Cuts and Jobs Act of 2017 do not only affect those interested in donating. Below, we’ve outlined several changes that will affect most taxpayers.
- The law will limit the deduction for mortgage interest to the first $750,000 in principal value.
- The law will limit the state and local tax deduction levels to a combined $10,000 from income, sales, and property taxes.
- Deductions for medical and dental expenses remain in place, just with a lower floor. You may only deduct the amount of your total medical expenses that exceed 7.5% of your Adjusted Gross Income (AGI).
- Job expenses and miscellaneous deductions that exceed 2% of your AGI are eliminated for the tax years from 2018 to 2025.
- Casualty and theft losses are repealed for tax years 2018-2025, except those losses attributed to a federal disaster. In fact, a majority of the individual tax provisions expire Dec. 31, 2025!
- The limit for cash contributions has been raised to 60% of your AGI (up from 50%).
In addition, the estate tax exemption has doubled for both individuals and married couples. Only those with very high net worth will be subject to estate tax under the new law, providing an incentive to give during their lifetimes (and receive an income charitable deduction) instead of waiting until after their lifetimes.
Questions About What the Tax Reform Means for Donors
While it is always best to consult with your tax or financial advisor to determine how you can best benefit from the new tax reform act, the professionals at the Bethesda Health Group Foundation could provide some valuable information if you still have questions about what the tax reform means for your charitable donation to Bethesda.
For additional information, please call the Bethesda Health Group Foundation at 314-800-1981.