Hiding beneath the headlines in this year-end US tax debate in the US Congress, one proposed change jumped out the loudest: the proposed doubling of the standard deduction. Whoa… We thought we had better look into this if we still want our charitable donations to remain tax deductible.
A quick phone call to our accountant confirmed our thoughts: We can take advantage of the current tax law by accelerating our 2018 donations in 2017. We know we always give X number of dollars a year; to the extent we can afford it, we’re going to make our 2018 donations early, by December 31, 2017.
We itemize deductions on our tax forms rather than take the standard deduction. The bottom line going forward: If the tax changes goes into effect, we won’t have enough deductions to itemize. As a married couple, we would receive a roughly $24K USD standard deduction. Fewer filing headaches for sure, and maybe we won’t need an accountant anymore. But our donations will no longer be deductible unless our overall deductions exceed $24K USD.
San Miguel is home to some 90-odd nonprofits, all of which depend, for the most part, on those of us who live here. Like most expats blessed to live here, we give back. We give what we can, when we can. We give privately, we give to nonprofits. In our minds, it is all the same. But in the real world of taxation, it is not. Tax-deductible charitable donations always have a financial incentive — a tax break.
So… if the law passes as written, starting in 2018 we’ll just have to give for the sake of giving. That works for us emotionally and intellectually, but financially and psychologically that tax deductibility always is there in the background, if not the foreground.
Our personal area of focus is on local educational opportunities. Our primary organization of choice is Jovenes Adelante because of its target beneficiaries, organizational model of success and sustainability, and the multiple ways to be involved on an in-depth, ongoing basis. You can sponsor a high achiever student for a university degree, mentor university students, volunteer to teach English to this same group of students, and more.
Like most Americans, we at least think about year-end tax planning, which often includes giving. ‘Tis the season. This year we are going to take a leap of faith and take that extra deduction now, doubling our charitable giving in 2017. The deduction likely won’t be available next year. Will we stop giving in 2019? No, but by then at least we will know the new tax system we are dealing with and be able to adjust. When it comes to charitable giving, sometimes timing is everything. Consult your accountant or tax advisor.
By Don Krim and David Russell