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New TCJA Data and Informed Giving Strategies

When a tax law changes, speculation is immediate but data that reflects actual effects takes a lot longer to receive. Since 2018 was the first year for the changes of the Tax Cuts and Jobs Act (TCJA) and 2018 returns were not filed until 2019, we only just recently started to see the data emerge to get a better picture of how the changes actually played out in 2018.

Data released by the IRS this fall confirmed the widely held assumption that fewer taxpayers would itemize in 2018. The rate dropped from 30% in 2017 down to 10%. This means that significantly more Americans, and probably many of those that you advise, are not receiving an income tax deduction benefit for their charitable gifts.

For your clients looking to continue to receive income tax benefits for their giving after no longer itemizing under the new law, various suggested techniques emerged over the last two years:

  • Bunching multiple years of donations into one year
  • Charitable distribution from an IRA account in place of taking an RMD
  • Making gifts of appreciated assets in place of cash
  • Utilizing a tax friendly vehicle like a charitable split interest trust or charitable gift annuity.

While it is hard to say for sure how widely these techniques were used in 2018, the IRS data suggests that many taxpayers may have bunched donations. The average amount of the charitable deduction increased at every income level amongst taxpayers that took charitable income tax deductions.

We here at OCF are happy to provide information and resources for you and your clients as you navigate their charitable giving in the face of these changes and start to see their individual tax consequences unfold.

Please let us know if you would like any support or resources from OCF in determining what may be possible for your donors when they partner with OCF on their charitable giving. We are happy to explore the possibilities and discuss charitable planning tax solutions involving split interest trusts.

Learn more about the impact of TCJA at wealthmanagement.com.

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