The new tax law that went into effect at the beginning of 2018 will have a significant impact on those who had typically received a tax benefit for deducting charitable contributions in the past.
The new law increased the standard deduction to $12,000 for single filers and $24,000 for joint filers. And, if you are 65 or older, you will get an additional standard deduction of $1,300 for single filers and $1,600 for joint filers. The new law also limits the total deduction for state and local income and property taxes to $10,000.
Because of the higher standard deductions and limited deductions for taxes, many taxpayers will not get a tax benefit for charitable contributions because their itemized deductions which include gifts to charity will be less than their standard deduction.
However, there is a way for taxpayers who over 70 ½ and have an IRA can get a tax benefit for charitable contributions even if they are taking the standard deduction. The taxpayer can request the IRA custodian make a direct transfer of money from their IRA to a qualified charity. This is called a qualified charitable distribution and, up to $100,000 is not taxable to the owner of the IRA.
Qualified charitable distributions particularly benefit taxpayers who are over 70 ½ and are required to withdraw funds from their IRA but have other funds to support themselves. Qualified charitable distributions satisfy all or part of your required minimum distribution from your IRA.