Tax refresher: What's changed under the new law?
Nov 19, 2019
The Tax Cuts and Jobs Act (TCJA) of 2017 enacted the first overhaul of the tax code since 1986. If you're still getting used to the new law, you are not alone. With year-end tax deadlines approaching, it's a good time to review a few significant provisions in the TCJA, and see how they might impact your charitable giving.
(Need more than a refresher? For a detailed overview of the law, read our news article from 2017, See what the new tax law means for you.)
Standard deduction increased. A higher standard deduction under the TCJA means you’ll have to reevaluate whether you have enough deductions to make itemizing worth it. Under the new law, some taxpayers may decide to bunch charitable contributions into a single tax year in order to benefit from itemized deductions.
A Vanguard Charitable donor-advised fund lends itself to a thoughtful, multi-year approach that maximizes your tax benefits.
You can give more cash. You may give up to 60% of your Adjusted Gross Income (AGI) to charity in one year, provided the contribution is made in the form of “cash”—checks, wires, and bank transfers. The previous limit before the TCJA was 50%. (A 30% limit still applies to contributions of appreciated securities.) Any giving that exceeds these limits may be carried forward and used over a five-year period.
Capital gains rates are unchanged. Assets held for more than one year are still subject to capital gains taxes when they are sold—but not when they are donated. The specific rate depends on your income bracket.
Want to reduce capital gains taxes? Consider contributing appreciated assets to your donor-advised fund. In general, mixing and matching the assets you donate can maximize your giving—and your tax benefits. Learn more about the advantages of donating appreciated securities and complex assets.
Remember that your favorite charities are also adjusting to the new law. The demand for their programs and services, however, has likely not decreased just because of changes to the tax code. Now is an excellent time to take meaningful, strategic action, and support the nonprofits you admire.