A Way to Get Your Christmas for Free

Posted at 22nd December 2017

We hope you are enjoying this Christmas season.

We have been hard at work digesting the new tax reform that will most likely be signed by the President and become law next year.  We have been formulating new strategies to help our clients take advantage of the upcoming changes to the tax code.  While much of the impact will be realized in the years to come, we want to inform you about an immediate opportunity that is available only through December 31. The concept is to receive a higher charitable deduction on your 2017 tax return than you would in 2018 by making future year donations before the end of the year.  Here is how it could work.


Two Significant Changes in the New Tax Law:

  1. Next year (2018) the standard deduction will increase substantially for everyone (new standard deduction would be $24,000 for couples and $12,000 for singles). 
  2. State income and real-estate tax deductions will be limited to a combined $10,000. 

Potential Impact:

  1. Most couples won’t get an additional deduction for the first $14,000 of their giving, and if they give less than $14,000 per year, they most likely won’t get any charitable deduction at all in 2018 and beyond.
  2. Pre-giving next year’s giving before the end of this year may provide a charitable deduction and therefore tax savings this year that would not be realized under the new tax law next year.

Two Examples- The Smiths and the Jones:

Mr. and Mrs. Smith normally itemize their deductions. They do not anticipate having more than $24,000 in deductions for next year. The Smiths decide to do their 2018 giving before the end of the year. Their pre-giving amount is $10,000.  They are in the 15% marginal tax bracket.  They could save $1,500 in taxes!  If they happened to be in the 25% marginal tax bracket, then they could decrease their tax liability by $2,500!

Mr. and Mrs. Jones do not normally itemize their deductions.  They decide to do $6,000 of their 2018 giving before the end of 2017. They have other deductions of $10,000 (and will have the same for 2018).  The Jones are in the 15% marginal tax bracket.  They could save $495 in taxes.

Your specific situation will be different.   You will need to act quickly to take advantage of this strategy.   Your additional donations will have to be charged (if giving by debit/credit card) or mailed (if giving by check) by December 31st.  Please contact our office if you would like to discuss how beneficial pre-giving could be for you.  Wouldn’t it be nice for “Uncle Sam” to pay for your Christmas presents this year?