Can charitable donations become a victim of tax law?

One way to do this is to use a donor-recommended fund, which allows you to make a charitable contribution and benefit from immediate tax relief for the full donation and then recommend grants. from the fund to your favorite charities over time.

For example, instead of giving $ 5,000 a year to a charity, speed up the donation by donating $ 10,000 every two years. In this way, you can get your itemized deductions greater than the limit of one year and take the standard deduction the following year.

In fact, more and more clients are using donor-recommended funds for this reason, according to Kate Kennedy, certified financial planner and partner at Cerity Partners in Chicago. "It's one of the few things we can control with respect to the tax benefit," she said.

Schwab Charitable, a donor-recommended provider of funds, announced a record $ 2.2 billion in charitable grants in 2018, an increase of 35% over the previous year. This means that, until the end of last year, donors continued to contribute to their fund accounts and then recommend grants to the charities of their choice.

Similarly, Fidelity Charitable announced a record $ 5.2 billion in grants in 2018, an increase of 17% over 2017.

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"Under the new tax law, charitable donations are a valuable badet for donors who are detailing their activities because the charitable deduction has been preserved while many other popular deductions have been capped or suppressed," said Kim Laughton. President of Schwab Charitable.

However, on closer examination, the total number of contributions has decreased from year to year, while dollar amounts have increased, said Laughton, which means that these donations came from a number lower – and wealthier donors.

"The richest people keep giving," Laughton said. "The charitable deduction is always a powerful tool at their disposal."

"We will have rich people who will give a lot and modest people who will give less, and I do not think that is a good trend," said Eileen Heisman, President and CEO of the National Philanthropic Trust. "We are going to have a big division of the haves and the have-nots."