Charitable Tax Deductions

Don't let the specter of tax reform stall your charitable giving

Remember the Tax Reform Act of 1986? The one that overhauled the U.S. tax code. Well, since then there have been about 15,000 changes… and there might be more coming. In the past decade, Congress’s “tax-writing” committees have held hearings and leaders have called for tax reform to no avail—yet.

Even if tax reform does gain traction this time, experts predict it will take months, or longer, to reach an agreement. Despite the uncertainty, there are things you can do to help simplify your tax preparation and maximize your charitable tax deductions.

Start by taking a look at what might change under tax reform—and what’s most likely to stay the same. Then, adjust your giving strategy accordingly.

So, what’s on the chopping block?

The president released a broad-strokes proposal that would significantly increase the standard deduction. The proposal also would cut most popular itemized deductions. One exception: gifts to charity, which would still be tax-deductible.

Keep in mind, however, that the president’s proposal is not “revenue neutral.” That matters to those members of Congress who have vowed not to increase the national debt. To them, all deductions might be on the table.

Even if the charity tax deduction survives, there’s a good chance you might no longer claim it. Here’s why:

  • With fewer options for itemized deductions, many taxpayers could find it no longer makes sense to itemize. Instead, they would do better simply to take the new, higher standard deduction.
  • If you don’t itemize, you can’t claim the charitable deduction.

The bottom line: It all depends on your situation, especially if you’re expecting additional income or gains this year. Depending on how reform shakes out, you might be better off giving in 2017, while tax rates are higher and you qualify for a larger deduction. Reach out to your advisor to discuss your individual tax circumstances and giving strategies.

Take seven simple steps to stay on track.

With or without tax reform, you can make small changes now so tax preparation is less painful next spring. Many of the following tax tips are simply “good practice” and, therefore, might be familiar to you. If you’ve heard them before, why not make this the year you give them a try?

  1. Get organized. And stay that way. Make time every month to sort through email notices and receipts. Set up tax-related folders and keep them current. When tax season comes around, you’ll have everything you need at your fingertips.
  2. Learn from the past. Look back at your most recent tax return. Did you receive a large refund? Adjust your deductions so you can use more money during the year instead of lending it to Uncle Sam. Did you owe more than expected? Increase your deductions or make quarterly payments. You’ll avoid potential penalties and the need to send a sizable tax payment in April.
  3. Mark your calendar. Make sure you meet your tax deadlines. If you pay quarterly, do it on time so you don’t get hit with a penalty. Quarterly payment dates typically are April 15, June 15, September 15 and January 15 of the following year.
  4. Plan for the future. Save as much as you can for retirement. If your employer offers a retirement plan, take advantage of automatic payroll deductions and contribute the maximum allowed. Depending on your cash flow, consider opening an IRA and funding it to the max. Remember, if you’re 50 or older, you can set aside even more.
  5. If you’ve got it, use it. Have access to a health savings account (HSA)? Add to it. HSA contributions are made on a pre-tax basis, and HSA withdrawals are tax-exempt when used to cover medical bills. Plus, funds in your HSA grow tax-free until you need to withdraw them.
  6. Give your way. Discover different ways to make tax-deductible donations. You have choices, from direct donations to donor-advised funds. What type of gift works best for you? Find the perfect giving solution today.
  7. Be picky. Choose the right assets for charitable giving. When it comes to deductions, some types of gifts are better than others. Here are two examples:  
    • If you have long-term appreciated securities, consider donating them directly to charity. You’ll avoid tax on your capital gains—and get a charity tax deduction for the value of the donated securities.
    • If you have securities that have lost value or depreciated, consider selling them and claiming the loss on your taxes. Donate the cash from the sale to charity and you could qualify for a second deduction—for your charitable donation.

Consider what really matters.

Tax reform. No tax reform. Either way, remember why you give: to support the causes that matter most to you. Be tax-smart about your giving and you can have a bigger impact.

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Charitable Tax Deductions

Your Giving Fund can help you be more strategic about taxes. Not only can it make things a lot easier come tax season, you may be eligible for charitable tax deductions and benefits that can help both you and, ultimately, the charities your Giving Fund supports.

Learn more about tax benefits

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Contributions to the Giving Fund are irrevocable. All recommendations from donors are subject to review and approval by TIAA Charitable.

TIAA Charitable does not provide tax advice. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.

TIAA Charitable is the brand name for an independent public charity that maintains a donor-advised fund program. The TIAA name is a registered mark of Teachers Insurance and Annuity Association of America and is used by TIAA Charitable pursuant to a license.

TIAA Charitable, Inc. has been recognized by the Internal Revenue Service as a tax-exempt public charity under Sections 501(c)(3) and 170(b)(1)(A)(vi) of the Internal Revenue Code of 1986, as amended (the “Code”).