Why You Should Increase Charitable Giving Before the End of 2016
December 13, 2016 | BY Yosef Z. Klein, CPA
If you think president-elect Donald Trump will be able to enact his proposed tax cuts in 2017, you should increase your charitable contributions before the end of 2016.
You can accomplish this by making contributions to:
• A private foundation
• A donor-advised fund
• A charitable lead annuity trust, also known as a CLAT, or
• Making outright cash gifts to charities
What are the tax benefits for this extra charitable giving?
President-elect Donald Trump’s proposed income tax changes include reducing the top current rate of more than 43% to 33% for 2017. This means that charitable contributions made during 2016 are more valuable than charitable contributions made during 2017 (the higher the tax rate, the more valuable the deduction). In addition, there has been discussion of new limits on itemized deductions that could impose a significant restriction on the use of the charitable deduction.
If you choose to increase your charitable giving, be aware of the overall contribution limits and rules that limit itemized deductions. You can contribute cash to a private foundation and deduct up to 30% of your adjusted gross income and (you can deduct the full fair market value of appreciated marketable stock, up to 20% of your adjusted gross income). For donor-advised funds, which are public charities the limits are less restrictive. Contributions of cash are deductible up to 50% of AGI, and contributions of appreciated assets—including privately-held stock–are deductible up to 30% of AGI.
If you have any questions about whether and how this will impact you, please speak with a Roth & Co professional, who will be able to guide you with any changes that may be necessary.