When people give to a charitable organization such as a church, it is most likely because they have a deep connection with it or want to see it succeed. Tithes and offerings are similar. You may feel like it is important to give tithes and offerings, but the Bible never specifies that you should give your tithes and offerings to the Seventh-day Adventist Church. You may choose to do that because you attend an Adventist church or because you feel connected to the Adventist Church in some way.
The benefits that come from writing off charitable donations on your taxes are a bonus. But the reality is, this bonus likely encourages giving. With the new tax law in place, though, this has all changed. The Tax Cuts and Jobs Act that went into effect Jan. 1 of this year sharply increased the itemized deduction. For a married couple, the 2018 deduction is $24,000, when it was $12,700 in 2017. Add to this a $10,000 cap on state and local tax deductions (previously there was no cap), and it all but eliminates the tax benefits for giving to a charity. This begs the question: Are there still financial benefits for giving money to a charity?
Your reasons for giving money to the church should be more than just a tax benefit. Nevertheless, there are still some ways to get a financial benefit for giving under the new tax law.
Qualified charitable distributions
The first way someone can benefit from their generosity under the new tax law is through IRA donations. Anyone 70-1/2 or older can make a direct transfer of IRA balances up to $100,000 per year to a charity (but 401(k) balances do not qualify). This money will never be listed on your adjusted gross income, meaning you will not be taxed on it. This qualified charitable distribution can also be used toward your required minimum distribution, as you are required to withdraw a set amount of your retirement money every year after you are 70-1/2.
Charitable stacking or lumping
This method involves some planning ahead and having quite a bit of cash on hand, but it can be beneficial when filing taxes. If you plan to give a set amount of money to a charity every year—say $10,000—instead of giving $10,000 over five years, for example, you could give all $50,000 in one year. This would bring you above the $24,000 standard family deduction and allow you to receive a tax benefit from the donation.
Charitable stacking and lumping can be beneficial under the new tax law for another reason as well. The charitable contributions deduction allowed during a tax year was previously 50 percent of your adjusted gross income (AGI), but has been raised to 60 percent. This means that if your AGI was $100,000 and you gave $60,000 to charity, under the previous tax law you would only be able to write off $50,000. Now you can write off the entire $60,000. This change makes charitable stacking and lumping an even better method of benefiting from giving.
As the new tax law becomes more and more ingrained in our country, there are sure to be new ways people find to benefit from giving. But the real reason you give should still stem from your involvement in an organization or desire to see it succeed. While your tithes and offerings may give you a tax benefit, these benefits are negligible compared to the impact you are able to make through your contributions.