We are barreling towards the end of our first tax season under the laws of the Tax Cuts and Jobs Act. Many married couples and individuals are finding it hard to itemize their taxes for 2018 (and likely each year moving forward) and thus taking the standard deduction when filing their return. This is wildly important for the fact that one of the few ways (without being super technical) to deduct your charitable kindness on your taxes, is if you actually get to itemize your return. For married couples, that standard deduction is now $24,000, which means you need a whole lot of mortgage interest, state income and property taxes, a monster amount of medical bills or substantial charitable contributions to exceed that $24,000 hurdle.
I know the pressure of making a donation in February and then the thought, “Oh man, I have to keep track of this for the next 10 months till tax time!” The endless treasure hunt for Goodwill donation slips every year…I guess not having to worry about every $15 or $20 donation is worth something?
Good or bad, many of our financial decisions are driven by emotion and incentives. Beyond the act of doing good and donating to a worthy cause, the ability to get some “credit” on your taxes for being a charitable person surely doesn’t hurt. With that credit being harder to earn, it will be interesting to see if people reframe or rethink that next donation. Could that money do more good by giving to family or saving for a child or grandchild’s college?
Maybe this is the type of decision that will cause you some internal tug of war or maybe this is a non event and you won’t miss a beat. Either way, we are here to help and bring some charity clarity to your finances!