Heard about Bunching? I’m sure many of you have already heard about the new tax bill which has been titled the “Tax Cuts and Jobs Bill.”
This new legislation will impact the Standard Deduction for both individuals and families. As it stands, the amount you can subtract from your taxable income without itemizing deductions on your tax return will rise to $12,000 for individuals and $24,000 for families.
Initially, the nonprofit community was very concerned this new tax bill would be a disincentive to give for folks who typically deduct their charitable contributions. However, there is a way to continue giving and getting your charitable deduction by using a method the accounting community calls “Bunching.”
“Bunching” is accomplished by simply doubling up on your contributions in one year, immediately receiving the tax deduction and then giving away these funds to the charity of your choice over the next 24 months.
Obviously, you will need to keep these funds in a 501c3 “Bucket” and that is where a Donor Advised Fund (DAF) at the High Point Community Foundation can help you. During your deduction year you simply put the money into your DAF, you immediately receive your tax deduction and then you may give your charitable dollars to the nonprofit of your choice whenever you wish.
DAFs are like a private foundation except there is no annual mandatory 5% distribution and the Community Foundation staff handles all your legal, accounting and due diligence chores. It is in essence an efficient and hassle-free way to give your philanthropic money away.
Here are some key points to remember:
- The minimum to establish a DAF is only $7,500.00
- A gift to your DAF is immediately deductible
- You are not rushed in your giving and you alone decide when you give and which nonprofit receives money from your DAF
- The money in your DAF is invested so it is being actively managed as you decide where to give it.
- Finally, “Bunching” allows you to continue to give and a DAF provides the vehicle through which to manage and distribute your philanthropic dollars.
Now is the time to look into BUNCHING and DONOR ADVISED FUNDS and the High Point Community Foundation would love to help you.