rain on charitiesI am all for tax reform that makes it easier and simpler to calculate and pay taxes. I like it a lot when rates are reduced so I can legally pay less in taxes. I don’t mind when loopholes and dodges in the tax system are closed. Think of them as potholes on the road of life. So, what is the problem with the latest tax reform reduction?


According to financial advisors that I have spoken to, charitable giving has plummeted by about thirty (30) per cent as a result of the tax reform. The culprit is the major increase in the standard deduction amount allowed to each taxpayer. The large standard deduction means that many taxpayers no longer need to itemize their expenses and donations to reduce their tax burden. If your motive for charitable giving was simply to reduce taxable income, then that incentive has been taken away.

Whoa! Charitable giving should be about helping people and supporting causes you believe in. Just because you no longer need to donate to your favorite charity does not mean that it is not needed. It is still vital, so that charitable good works will continue to be performed for the people that need it the most. You should probably calculate that ten (10) or more per cent of your standard deduction still needs to go to fund the charities of your choice. Give because it is the right thing to do, not because it is a tax deduction.

      Wait! There is still one loophole left that works if you are at age 70 ½ or older and have an Individual Retirement Account (IRA) that you take out a Required Minimum Distribution (RMD) every year. You can take part, or all, of your RMD (up to $100,000) and give it directly to one or more charitable organization. This is called a Qualified Charitable Distribution (QCD). Since you do not get the money first, because it goes directly to the charity, the money does not count as gross income to you. It counts toward fulfilling your RMD. You can still take the new larger standard deduction against your now lower gross income which may reduce your tax liability.

Who wins? The charity that receives the QCD will be happy. You have a potentially lower tax bill to make you happy. You can feel good again about donating to your favorite charitable cause. Think of this as a bonus for growing old and wisely saving for that rainy day. You can rain some dollars and help a charity grow.

~ Dave Courtney, SAVE Board Member--retired

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