Year-End Charitable Planning After Tax Reform: Qualified IRA Distributions, Stacking Strategies, Income Shifting

Description

The 2017 tax reform law altered the landscape of charitable contributions, reducing tax incentives for some taxpayers making charitable donations while encouraging those contributions for others. Tax advisers performing year-end charitable planning must take note of the impact of the law on charitable contributions, particularly for taxpayers eligible for RMDs from their qualified accounts and those with existing charitable trusts.

Two elements of the tax law have a specific impact on taxpayers' charitable giving. The increased standard deduction will often lessen the tax benefit of charitable contributions for some taxpayers. In some cases, this will also apply to the jump in the federal transfer tax exemption amount. Charitably inclined taxpayers may need to consider strategies such as multi-year "stacking" to maximize tax advantages from charitable donations they intended to make in any case.

The law also extends the provision allowing taxpayers aged 70-1/2, who are subject to RMD rules, to treat a qualified charitable distribution as a non-taxable rollover. The QCD rules are specific as to which recipients are eligible for rollover treatment.

The new law also creates advantaged—and disadvantaged—trust structures for making contributions. Taxpayers should focus on shifting income to complex trusts to maximize the benefits of charitable giving. Further, rising interest rates benefit structures such as CRATs, GRITs and QPRTs, while lessening the benefits of others such as CLATs and GRATs.

Listen as our expert panel provides a thorough and practical guide to charitable tax planning after the 2017 tax overhaul.