The College Donor Digest

Year-End Tax Tips for the Higher Ed Donor (2018 Edition)

November 20, 2018 | Joe DeGraff

Good news: While the new tax law shakes things up, it’s a far cry from changing the higher ed giving landscape entirely. By making minor changes to your giving strategy, you can master the tax changes and have an even larger impact on the future of America’s students.

Think Big, Think Creative

Because the standard deduction was doubled ($24,000 for married couples filing jointly), it’s important to give a g to make a tax-advantaged gift. The good news is that cash contributions to charities can now be deducted up to 60% of adjusted gross income, instead of the previous 50%. This means that a large gift over the threshold could result in additional tax savings, compared to previous years.

If you usually give large gifts, it’s still important to review your giving strategy closely. There are some gifts that will no longer count as charitable contributions under the new tax law, such as stadium tickets for college athletics. And schools with large endowments will encounter new taxes in 2018, which will reduce the effect of gifts to well-heeled institutions. This is a good opportunity to research other worthy schools, programs, and centers where you would be proud to have an impact.

Consider Alternative Philanthropic Vehicles

There are several new giving vehicles that go beyond traditional donations. Look into Charitable Remainder Trusts if you are seeking an immediate tax deduction but could also benefit from an income stream in future years, like a philanthropic endowment.

Another option particularly useful for tax planning, especially for high-income taxpayers who give to charities on a regular basis, are Donor Advised Funds (DAFs). DAFs allow donors make immediately tax-deductible continuations to a professionally managed fund, and then recommend grants from your account in later years.

Philanthropy is an investment, and as in investing, it’s important to diversify giving vehicles. Your trusted philanthropy advisor will have strategies to mix-and-match giving vehicles to maximize tax efficiency.

Giving Now Gives You More Control

Your gifts will always represent your values if decisions are made personally, rather than implemented by your estate. If you have a secure retirement plan, guiding how your funds are spent now allows your philanthropic aims to take root today.

Another major tip: consider tapping into a well-funded IRA. Donors age 70½ or older can contribute up to $100,000 of IRA assets directly to one or more charities. The advantage is twofold: The gift counts toward your annual required distribution from the IRA, and it’s removed from your taxable income.

Ask for Help

This isn’t the last time that Congress will take a crack at tax reform, but if there’s anything that is guaranteed for years to come, it’s the complexity of tax law. According to a 2016 U.S. Trust report, 94% of high net worth donors surveyed would like to be more knowledgeable about at least one aspect of charitable giving. Speak with your financial advisor or a philanthropy specialist (like FAR) to make sure your next gift advances both your philanthropic goals and your financial well-being.

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The Fund for Academic Renewal is a program of the American Council of Trustees and Alumni, a not-for-profit, tax-exempt organization as defined by Section 501(c)(3) of the Internal Revenue Code. All contributions to FAR are fully tax-deductible to the maximum extent provided by law.