Tax Planning: Are Bundled Gifts One Answer for Donors?

According to a recent article in Forbes by sponsored content provider, Forbes Nonprofit Council, financial advisors are having their clients consider bundled gifts to their favorite charities or donor-advised funds every few years rather than annually. The idea is that a more substantial amount given every three to five years will cause their itemized deduction amount to rise above the new higher standard deduction level established with the Tax Cuts and Jobs Act of 2017.

The article estimated that taxpayers who will make itemized deductions for the 2018 tax year could fall to as low as just over 10 percent of U.S. taxpayers. This is due, it claims, to “the increase in the standard deduction to $12,000 and $24,000 (single and joint, respectively), plus the near elimination of the deduction for state and local taxes.”

For taxpayers who commit to charitable giving every year, they will still likely give, but the idea of bundled giving may appeal to taxpayers who would still like some tax benefit from their giving and can afford to give a larger sum every few years rather than annually. For example, a donor who gives $3,000 a year may instead choose to give $15,000 every five years for tax purposes.   

This idea introduces new considerations for donors as well as the nonprofits they benefit. Donors who choose to bundle or “bunch” their gift may only itemize in these “high-giving” tax years and should plan ahead regarding other life changes that may occur in that year to take further advantage of other tax benefits. 

Likewise, nonprofits that begin to receive larger gifts, but only every few years, will need to consider different budgeting methods and planning as well as revised communication and recognition for bundled donors. Nonprofit leaders may also need to anticipate and understand potential uses for these larger gifts and how they may impact the organization’s tax planning and reporting.

As we work through the 2018 tax season, contact LvHJ’s tax team to discuss your options for giving, tax planning or not-for-profit accounting. We will help you look ahead to create a personalized accounting and tax strategy. 

Source: Forbes Nonprofit Council, Community Voice, “Could Annual Gifts Be a Thing of the Past?”

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