December 26, 2017 10:24:56 AM
For most people, the arrival of Christmas means the end of the season of giving.
But for those with an eye toward tax season, the week between Christmas and New Year's Day is time for both giving and receiving.
Charitable giving spikes in the days leading up to the end of the year, financial planners say, as donors seek tax deductions that can be applied to their 2017 returns. Donations to tax-deductible charities must be made by Dec. 31 to be used for 2017.
And with the new tax bill passed by Congress, some financial advisers are urging their clients to give as much as possible before year's end to take advantage of those tax benefits.
Those who plan to take the tax bill's increased standard deductions in 2018 and had previously itemized their returns and used charitable giving as deductions are being advised to make the donations they would have made in 2018 before the end of the year.
The changes in the taxes are one of the many things financial planners are busy working on as the year comes to a close.
"The last week of December is one of the busiest times of the year for us," said Lauren Black, a certified financial planner with Phillips Financial in Starkville. "Aside from tax season itself, it's probably our busiest time of the year."
Like financial advisers throughout the country, Black will be going over her clients' portfolios this week to make sure they are aware of anything they can do in the final days of the year to reduce their tax liability for 2017.
"There are several things we go over," she said. "For example, we have a lot of clients who are qualified to take money out of their IRA. Some have reached the age where they are required to take money out of their IRAs. When you take money out of the IRA and give it to a charity, you actually get a better tax break because it's a dollar-for-dollar credit."
In a year that featured a booming stock market, making charitable donations now may ease the tax burden created by those capital gains.
"What we do in that situation is look for any losses over the year that can offset that," Black said. "Aside from that, charitable donations are a really good way to reduce the tax burden."
Danger to nonprofits
Although Danny Avery is not a financial adviser, he has a vested interest in making sure that message gets out too.
Avery is the executive director of The United Way of Lowndes County. This week figures to be a busy one for him.
"About 30 percent of all our donations come in the last three weeks of the year," said Avery. "Our annual campaign starts in September and runs through the end of the year. We're short of our goal this year, so we're hoping there will be a big last-minute surge in giving. All 18 of the agencies we support are 501(c)3 charities, so the donations you make to the United Way on their behalf are fully deductible. We'll spend these last few days of the year reminding people of that."
Charities throughout the country are viewing the new tax legislation as a real threat to their efforts.
United Way, the world's largest privately funded nonprofit, lobbied unsuccessfully against the bill, claiming United Ways across the country will lose as much as $400 million in donations annually as more taxpayers choose to tax the increased standard deduction rather than itemizing their returns.
"I am deeply troubled by many aspects of the tax reform bill the Senate is now considering," United Way Worldwide President and CEO Brian Gallagher said in a statement released shortly before Congress passed the Republican tax plan along party lines. "Congress is gambling with the lives of millions of people who rely on charitable and government social services by increasing the federal deficit to fund tax cuts.
"The elimination of the charitable deduction for 31 million middle and upper-middle income taxpayers causes such damage to our ability to help people, we have no choice but to oppose the bill," he added.
For Avery's part, he hopes most of those who contribute locally are more motivated by helping others than reducing their tax burdens.
"We are using social media and advertising to remind people to make their donations before the end of the year," Avery said. "These donations help so many people in so many ways, everything from education to health to financial security.
"We can't really make our allocations to our partner agencies until we know how much we've brought in, so a lot of our planning has to wait until January," he added. "Hopefully, we'll see a big surge in giving over these next few days."
Slim Smith is a columnist and feature writer for The Dispatch. His email address is [email protected]
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