09 Nov How to Time Your Charitable Contributions to Save on Your Tax Return
Deductions are an important factor when filing your tax return, and can significantly alter the amount you owe; in some cases, deductions can even offer you a refund, when you might otherwise have been making a payment to the IRS! This year is the first year that the majority of the Tax Cuts and Jobs Act will be applied to your tax return, and it’s making deductions even more important than they were before.
Now, properly timing your charitable donations and payments for other deductible expenses can make a significant difference on your tax return. Here are some tips on timing your itemized deductions so that you can keep more of your money in your pocket.
Standard versus Itemized Deductions
When filing your tax return, you typically must choose between itemizing all of your deductions or taking a standard deduction amount. Generally speaking, taxpayers will add up their deductible expenses at the end of the year, and simply take whichever type of deduction is more. For 2018, the standard deduction is $24,000 for couples filing jointly. So, if you add up your deductible expenses and the total is higher than the standard deduction, you would take the itemized deduction.
However, if you make consistent contributions to a charity, or are anticipating other deductible expenses in the near future, there may be a more proactive way to handle your deduction and get a greater benefit from them.
Bunching Your Contributions
Many of our clients make regular tithe payments to their church, paying the same amount at the end of each year. As an example, let’s say you’re filing your return this year and you can come up with $26,000 in itemized deductions. $14,000 of this is the tithe payment you make to your church every year. Your first thought might be to simply claim the itemized deduction. Assuming your itemized deductions are roughly the same next year, this would give you a total of $52,000 in deductions between the 2018 and 2019 tax years.
However, if you postpone your tithe payment to January of 2019, then pay your usual $14,000 in tithes at the end of 2019, you could claim the standard deduction ($24,000) in 2018, and your itemized deductions would be $40,000 in 2019. This gives you a total of $64,000 in deductions between the two tax years. By deferring your tithe payment by a few weeks, you are able to claim an additional $12,000 in deductions.
This is a pattern you could continue to follow, bunching your itemized deductions together every other year, and reaping a much greater benefit from your qualifying expenses and contributions.
For more advice on how to bunch your charitable contributions in order to get the maximum benefit from your deductions, contact The Accounting Guys to meet with one of our tax planners in Provo. We’ll help you go over this year’s deductions, so that you can make smart decisions that will give you the best results on your future tax returns.
Mindspace OutsourcingPosted at 04:09h, 16 November
Hello, The information you’ve made available is indeed very important. This article tells us about tax deduction for charitable donations .We must Keep Records of our donation, and list each donation in detail with the date.