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Charitable Contributions – Impact Under Tax Cuts & Jobs Act

Make More Charitable Donations in 2017 – Both Cash and Non-Cash

Because the tax brackets are decreasing in 2018, the impact of charitable donations will also decrease. This impact will be felt the most with people who are currently in the 15% to 28% tax brackets and the 39.6% bracket because they will be reduced by about 3% on average.

Cash Donations to Charity

Cash Contributions –Reduce your 2018 cash charitable contributions and instead make extra contributions in 2017.  If you have pledges you’re making – make those payments in 2017. Here’s some examples:

Individual Taxpayer – Bill has a few favorite theatre companies that he likes to support. He has pledged a combined $25,000 a year for the next 5 years to various theatres. Bill still owes $100,000 on his pledge and Bill’s Tax Bracket is being reduced by 3% starting next year. Bill’s going to pay off his pledges and mail payments totaling $100,000 now so that he can maximize the tax impact of his charitable contribution deduction.

Corporation – ABC Company is a C-Corporation and for 2017 pays a whopping 35% tax on all income. Starting in 2018 that tax bracket gets reduced to 21% – a huge 14% reduction! ABC Company has pledges of $1,000,000 a year to support local charities. ABC realizes that if they make their $1,000,000 pledge in 2017 rather than 2018 they will have an increased tax advantage in 2017 of $140,000! ABC is in a very positive cash position and can’t write their check fast enough. ABC communicates with the charities that he is making the pledge for 2017 and that even if the pledge arrives after December 31, they want the pledge recorded as of the date of mailing. ABC takes the extra step of sending the pledge payment via certified mail, FedEx or UPS so that there is no question as to the date of mailing.

Non cash charity charitable contributions

Non-Cash Contributions – It’s the day after Christmas. You look around your house and have no where to put all of the new things in your house, so you start gathering up all of your old items to donate them to charity. If you’re like most people you load everything in the trunk of your car, drive around with them in your trunk for a month until you finally need the trunk room and drop them off. Or, you put everything on your front porch and wait for a pickup that won’t happen until 2018. NOT THIS YEAR! Make sure to drop off all of your non-cash items in 2017 rather than 2018 and get a receipt. That old car sitting in your driveway that hasn’t ran in 3 years? Donate that car in 2017 and make sure it gets picked up by the end of the year!

 

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