Eric Zizich:
Welcome back. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Great to have you back, David.
David Nelson:
Thank you, love to be here.
Eric Zizich:
Absolutely. So as we’re wrapping up the year, we continue our discussion on charitable giving. What would you say is the single most important thing for viewers to take away?
David Nelson:
Without question, understanding, as far as how the rules have changed pertaining to deductibility as far as of your contributions. So we’ve gone from a world of, for a married couple, $12,000 is the threshold, as far as deductions, to have it be deductible. In other words you had to give above that.
David Nelson:
Today, it’s 24,000, so it doubled a year-and-a-half ago roughly. And so now individuals, if you don’t have deductions, itemized deductions exceeding $24,000, you’re going to use the standard deduction. So that’s big when it comes to charitable contributions.
Eric Zizich:
So if they won’t get tax benefits in the same way, what are strategies that they can use?
David Nelson:
So this is a real dandy, and hopefully everybody can stay with here, as far as this slide, I’ll give you the visual to match up here as far as the words. If I had $15,000 in deductions… I’m a 50-year-old married couple having $15,000 in deductions, I should say, and I’m giving $5,000 away as far as to charity, that adds up to $20,000. Subsequently, you can’t deduct your $5,000 contributions.
David Nelson:
Now, scenario two, what we do is we walk through and say, “We’ve got a totally different approach with the new tax laws. Here’s what we might want to consider. We might want to consider bunching multiple years as far as into one.” Now again, I realize some people can’t afford to do this, but if you can afford to do this, there’s terrific benefits that come along with it, by bringing in multiple years.
David Nelson:
We use seven years here, so in other words, instead of 5,000 per year that you can’t deduct, if we bring it together, and we make that 35,000, and we make it a onetime transaction, you’re not doling out 35 per year, we’re just lumping it up.
David Nelson:
Through this method, individuals are going to be able to get a $26,000 deduction, whereas if they did it every year, they’re going to get zero. So they really want to focus on doing something like this. It’s called bunching.
Eric Zizich:
So for people then, who maybe they’re hesitant, they like the idea but they don’t want to give to one organization all at once, but they want to spread it out, what do you recommend?
David Nelson:
Terrific question. And what I would certainly recommend, as far as for those individuals, is to look into, and we’ve talked about this as far as on prior program, a donor-advised fund. A donor-advised fund allows individuals to take this 35,000 of this example, put it in the bucket, get the tax benefit today and spread out the distributions over a seven year period of time.
David Nelson:
And again, now it can go to multiple charities. I don’t have to focus just on one. And most individuals are going to have multiple pet charities that they want to give to. And certainly, the donor-advised fund is one of those instruments that will allow them to do that.
Eric Zizich:
Well, David, thanks for your wisdom as people wrap up their end of the year giving.
David Nelson:
Thank you. Appreciate it.
Eric Zizich:
Definitely. And if you missed any of our discussion, we’ll make it available. That’s on OurQuadCities.com.