New tax laws impact the way people give to charity

According to the Wall Street Journal, the near doubling of the standard deduction in the recently passed tax bill changed the way many people are handling their charitable contributions. Under the former tax law, these donations would be applied to a filer’s itemized deductions and could, therefore, be used to lower the amount of taxable income for an earner.

Under the new plan, the number of people itemizing their deductions is estimated to drop by more than half, from 26 percent down to 11 percent of households.

These changes created the need for many to increase their contributions for the 2017 tax year to benefit and much of this money flowed into what are known as charitable funds. Unlike a direct gift, these funds hold the money and allow the donor to choose which charities the money goes to throughout the year. A trend could evolve in which taxpayers are alternating between taking the standard deduction one year and making a lump sum payment to charity during the next year to reach the itemized deduction threshold.