APRIL 19, 2018   |   VIEW AS WEBPAGE
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Kristi Knous, president of the Community Foundation of Greater Des Moines.

Bunch Your Donations Together to Claim Tax Deduction

The new tax reform law could put a crimp on charitable giving. We’ll explain in a moment. But first, there may a solution, at least partially.

For that we need look no further than the Community Foundation of Greater Des Moines. It offers a service—bunching, you can call it, or front loading—that allows you to give whatever it is you can (you may have to stretch to give more than you normally would at one time) in order to properly claim a tax deduction as you itemize the expenses on your tax return. And then the foundation will see that the charity of your choice gets the money intended for it.

The tax problem with gifting arose because of the near doubling of the standard deduction granted taxpayers for 2018 and beyond. Now that they get that boosted deduction, many taxpayers will find that they are less able to itemize deductions, and the only way you get a tax break is by itemizing.

The problem is exacerbated by a limit of deductions for state and local income taxes, which also go onto Schedule A. Further, mortgage interest—yet another Schedule A item—is disallowed for the portion of a loan amount that exceeds $750,000.

Add it up, and the itemization limits potentially spell bad news for charitable giving. Yes, people will still donate to their favorite charities. But it never hurts to have Uncle Sam egging along the process by way of a tax break.

To patch things up, Kristi Knous, president of the Community Foundation, said donors can take advantage of a DAF—a Donor Advised Fund. This is a government-recognized charitable fund that pulls in money and then disburses it at the behest of the donor. So if you don’t have enough to qualify every year for itemization, you just give a little extra—here’s the bunching part—and then dole out the money to your selected charities over the next two or three years.

"There’s no minimum to give," said Knous, just enough to clear that itemization hurdle. You’re not locked in to giving all of that bunched amount to a particular charity, but can change from time to time what you donate to, and how much.

On the plus side of the tax bill vis-à-vis charitable gifting, the upper limit that can be donated has been lifted from 50 percent of adjustable gross income to 60 percent. And one other charitable gifting angle was left untouched. Writing in "FA Financial Advisor," Russell James noted that donating appreciated stocks, bonds or other assets instead of cash still avoids all capital gains taxes regardless of whether or not a donor itemizes.
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Why Do Iowans Get a 15-Day Break on Filing State Taxes?

If you've sent your check to the U.S. Treasury (the payment deadline was Tuesday), please know that they appreciate your effort. If you haven't sent a check to the Iowa Department of Revenue, relax—it’s not due until April 30.

It's no big deal, but why, I wondered, does Iowa give taxpayers a 15-day break? (From what I could see, it's the only state with a deadline that differs from the federal timeline). So I asked them. They didn't know. Could it be that the reason is just lost in the fog of time? That thought that was as good an explanation as any.

So I also asked whether there has ever been any discussion about linking the state deadline to the federal. They were more certain on this point: not to their knowledge.

State and federal filing deadlines for extended returns differ as well. It's Oct. 15 for federal, and Oct. 30 for the state.

So I guess my curiosity about this time lag thing will just have to be left at that. But I do know that there is a linkage when it comes to making the payment. Those deadlines—April 15 (the normal federal date, extended this year because it fell on a weekend and then April 16 was a local holiday in Washington, D.C.) or April 30—are when payments have to be made. Never mind that you haven't finished building your return; you still have to pay by the deadline. Otherwise, penalties set in.
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