Ask The Taxgirl: Bundling Charitable Gifts

Taxpayer asks:

Dear Taxgirl:

So I was trying to figure out how screwed we (my wife and I ) are because of the new 2018 “tax cuts” and it looks like we lost about 16k worth of deductions. we paid approx. 22k in state, local and property tax (Paul Ryan would call this the SALT tax) but the Treasury now limits this deduction to 10k. So we lost 12k in deductions there. Also because of the new tax law our charitable tax deductions are now worthless to us so a loss of about 4k there for a total loss of 16k in deductions, or in other words I now owe an additional 4k in taxes. SOME TAX CUT! So what is part of the solution? I am now going to stop making charitable contributions and just put the money in a savings account. After about 10 years I will have about 40k in this saving account and if I donate it then I will be able to deduct nearly all of it because I will be far in excess of the standard deduction and I will qualify to deduct it again! I only point this out here because I have not seen a single tax account recommend this but for many people this makes sense.

Taxgirl says:

This is a great strategy. I’ve been encouraging folks to do something similar: it’s called bundling gifts. The idea, as you noted, is to alter the timing of your charitable giving game plan to pack the biggest punch. The reason, of course, is that with the doubling of the standard deduction (you can see the 2018 tax rates and other tax changes here), there’s a reduced incentive to itemize. Since you must itemize to claim a charitable deduction, some taxpayers won’t benefit by giving to charity in one year.

So, for example, instead of donating $1,000 annually for each of five years, consider giving $5,000 all at once. It’s the same gift as before, but if you coordinate it with your other potential deductions, you can take advantage of the deduction in a year you itemize.

One thing to keep in mind: as the law currently stands, the standard deduction/Schedule A scheme will remain in place through 2025. I tell taxpayers to plan using today’s laws because what one administration puts in place, another can take away – speculation is hard at the best of times. We aren’t sure what’s going to happen in 2026 but we have some inkling what should happen for the next seven years. Keep those dates in mind when planning.

Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to “ask the taxgirl.”