The GOP tax bill, Tax Cuts and Jobs Act (TCJA) of 2017, actually is the most sweeping tax legislation in more than 30 years. Really. The highlights: a big reduction in corporate tax rates and a bunch of changes to personal income tax rates and deductions.
In addition, they have doubled the standard deduction for 2018. As a result, "the incentive to give to charity [in 2018] may decrease," says Mark Luscombe, principal analyst at Wolters Kluwer, a tax and accounting services company.
So What Do You Do?
It's worth talking to your advisor about moving your 2018 contributions into 2017 to get the tax benefit this year.
When deciding what to donate, don't forget your appreciated stock. If you donate stock to a charitable organization, you won't owe capital gains tax and your deduction will be equal to the fair market value of the stock. So you can rebalance your portfolio and get at charitable deduction at the same time.
In addition, if you are 70.5 and need to take a distribution from your IRA, remember that you can send your distribution right to your favorite charity and avoid the tax hit.
Get the Proper Paperwork.
Regardless of the changing tax rules, the IRS has been cracking down on the documentation of donations.
Basically, you need a receipt for everything!
And no amount is too small.
Any cash contribution -- regardless of the amount -- needs a receipt.
If you're going to make a last-minute contribution on your credit card, make sure it's stamped Dec. 31 or earlier.
If you write a check that is dated before the end of the year, make sure the charity deposits it in a timely fashion, or the IRS may think you gave the check in 2018 and fudged the date.
Here's a big one: if you donate something that is $250 or more, make sure you get a thank you note from the charitable organization.
And it must say that "no goods or services are received in return."
So if you buy a seat at a dinner, your deduction can't include the cost of the food. Same goes if you buy the whole table at an event. The whole table's food needs to be subtracted, because otherwise you got something in return for the donation, says Luscombe. Fingers crossed the charity will break this down for you in your thank you letter.
If you participate in the raffle at the charity event, you get nothing.
But if, on the other hand, you buy something at a charity auction, you get a deduction if you paid more than the item is worth.
If you donate an item to an auction or charity, remember that all non-cash donations over $5,000 need an official appraisal, says Luscombe.
Then keep all this paperwork with your records in case you are ever audited.
Donating a car or boat, is trickier. Not only do you need a form from the charity stating the fair market value of the donation, but you actually also need to send that documentation to a special IRS address to qualify for the deduction.
Don't Forget the Small Stuff.
Here are a few more things to include when you start tallying your charitable contributions.
- If you volunteer your time as a board member at a school or hospital, you can deduct your travel expenses, presuming they were not covered.
- If you make cookies for a bake sale, you can deduct the cost of the ingredients.
- If you drive to a charitable event, you can deduct 14 cents per mile you drive. (Your Uber fare to a black tie gala does not count, though. That's considered too fun for the IRS.)
So be sure to include everything and take advantage of the potentially larger 2017 charitable deductions -- just make sure have all your receipts.
Because while it feels good to give, it feels rotten to get audited.
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