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Understanding Giving and the New Tax Law

The passing of the new tax law in 2017—called the Tax Cuts and Jobs Act—has raised many questions among taxpayers about how the law affects them, including their wish to give back to the charitable organizations they regularly support. Richard Letocha, a gift planning advisor for Johns Hopkins Medicine, discusses ways to maximize your tax savings while still doing good for Howard County General Hospital (HCGH):

What is your key takeaway from the new tax law?
To acknowledge the effect of the increase in the standard deduction to $12,000 per person and $24,000 per married couple. This increase means that far fewer taxpayers will choose to itemize deductions on their federal income tax returns. Donors who itemize their deductions receive an income tax benefit from making a charitable gift. Those taxpayers who will no longer itemize will not receive a tax benefit for many charitable gifts, because the after-tax cost of making a charitable gift will be equal to the amount of the gift.

How might I continue to itemize my deductions while supporting HCGH?
Consider concentrating your charitable giving in one year, so that the sum of the itemized deduction exceeds the standard deduction in that year. For example, if you file as a single taxpayer, instead of paying a $15,000 pledge in equal installments over five years, you may wish to make one gift of $15,000, taking advantage in that year of the ability to deduct the gift.

Are there other tax-efficient ways to give back to HCGH?
Giving appreciated securities, such as stocks or mutual funds that you’ve held for at least one year, is advantageous because you benefit HCGH and avoid capital gains tax. For donors who itemize, the benefits of giving appreciated securities are even greater as they also receive a charitable deduction for the fair market value of the securities.

Another mutually beneficial giving option for many donors is the IRA charitable rollover. Individuals who are age 70½ or older may give up to $100,000 annually from a traditional IRA directly to a charity like HCGH. These funds are excluded from taxable income and count toward the donor’s required minimum distribution. By avoiding paying tax on unneeded distributions from their IRAs, donors receive an income tax benefit, even if they do not itemize.

Yet another option is to establish a charitable gift annuity. A charitable gift annuity supports the future of HCGH and provides benefits to you or a loved one, including: fixed, guaranteed income, an income tax deduction for the value of your gift, partially tax-free income, and favorable treatment of capital gains when you fund your charitable gift annuity with appreciated securities. What’s more, payout rates for the HCGH charitable gift annuity program just went up, so it’s a good time to establish a new charitable gift annuity and receive more income.

How do I know the giving option that is best for me?
Please consult your own advisors about how the Act will affect you. I can help you evaluate your options, too. Please contact me at 410-516 -7954 or rletocha@jhu.edu.

Richard Letocha, Esq., CFP®, is a gift planning advisor at the Johns Hopkins Office of Gift Planning. The Office of Gift Planning serves all of Johns Hopkins Medicine, including Howard County General Hospital. In addition to the giving options described above, he will work with you to recommend ways to give that achieve your estate planning, financial and philanthropic goals. These include gifts from your estate and gifts that provide income to you.

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