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Think Like a Billionaire:

For most taxpayers, exceeding the new standard deduction of a $12,200 for individuals and $24,400 for married couples while the state and local tax deduction is limited to $10,000, will be difficult unless we look at charitable deductions differently. We need to think about multi-year tax planning if we want our charitable deductions to work for us on Schedule A.

Some ideas

  • Bundle your charitable donations every other year. Say as a married couple, your state and local taxes are at the limit of $10,000 and you donate $10,000 to charity every year. Your deductions are $20,000 for 2019; below the standard deduction amount. But, if you are going to give that $10,000 every year, why not move up your 2020 contribution to 2019 and have $30,000 of deductions in 2019. Then wait to re-bundle again in 2021.
  • Donor Advised Funds – Are you in the position to set aside charitable donations for a number of years? Work with your CPA to decide if adding $30,000 to $50,000 to a Donor Advised Fund helps your tax situation in any given year. The year you set up the fund you receive a deduction of the entire amount that goes into the fund and you can distribute the balance to qualified charities over a number of years.
  • Over age 70½ and have the ability to fund your charitable contributions from a Traditional IRA? You can make a Qualified Charitable Distribution up to $100,000 with a check straight from your IRA custodian to a charity. This will lower your taxable income and avoid income tax on the distribution and satisfy your distribution requirement with the IRS.
  • Business owners that are set up as partnerships or S-Corps may want to use charitable donations, investing in depreciable equipment, and saving more in retirement plans with deductible contributions in their tax planning. These strategies may preserve the small business 20% deduction passed through to individual tax return to ensure your taxable income does not exceed the $157,500 limit for single filers and $315,000 for married couples.

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Peter B. Smith is a Family Wealth Advisor at Planning Solutions Group in Fulton, MD and is an Annapolis resident. He can be reached at 301-543-6008 or by email at