Giving to charity is a reward in and of itself. And the first Giving Tuesday under a new tax era serves as a big reminder of that.
All of the Thanksgiving leftovers have been picked through. Black Friday deals are over. Cyber Monday specials are even wrapping up.
That means Giving Tuesday is upon us. The relatively new effort helps shine a light on nonprofit organizations that help the needy and encourages giving to charities as we head into the winter holiday season.
In the past, many people who itemized their taxes were able to claim a deduction for charitable giving they made on Giving Tuesday or any other day of the year. (Claiming the standard deduction means leaving the charitable giving deduction on the table.)
But the new Tax Cuts and Jobs Act, which Congress passed into law last year, makes claiming that deduction harder. By increasing the standard deduction, economic forecasts show dramatically fewer taxpayers itemizing this tax year.
This is important to remember as this tax year comes to a close, says Amy Peek, accountant and owner of Pittsburgh-based Peekz ConsultiN.
A lot of people are used to giving to charities around the holidays — and then getting a tax benefit in April.
Peek advises taxpayers to meet with a tax professional as soon as possible to see how not being able to claim the deduction will affect their tax situation and whether the change will increase their tax burden.
There may be some other ways to offset the change, but options become more limited as the year reaches its end.
Upper middle class taxpayers who understand the tax benefits to charitable giving will really feel the change, she said.
“It’s really going to hurt those people who are used to donating $5,000 to $6,000 a year,” she said. “They might not do that anymore. And it’s going to drastically affect the nonprofit world.”
If you’re unsure whether you will be able to claim charitable giving this tax year — or how not being able to itemize will affect your tax position, please reach out to a tax professional for guidance.
Peekz ConsultiN LLC is a Pittsburgh-based accounting firm, located in the West Side, that caters to individuals, small businesses and nonprofit organizations. We aim to empower clients to help them take control of their finances and achieve their dreams.