Tax Reform and Charitable Giving for 2018
How to Support the American Industrial Hygiene Foundation at Tax Time
The 2017 Tax Cuts and Jobs Act tax reform package brought a lot of big changes. For corporations, tax rates declined from as high as 35 percent to 21 percent. In addition, tax incentives were put in place to encourage corporations to bring assets back to the United States, with tax rates as low as 8 percent for some repatriated assets. Revisions also include a 20 percent deduction of qualified business income for many small business owners.

For many individuals, the tax package brings lower tax rates and expanded brackets, meaning more income will be taxed at the lower bands of our progressive income tax structure. New tax rates of 12 percent, 22 percent, and 24 percent replace the 15 percent, 25 percent, and 28 percent rates respectively.  The most prominent change for most filers is the increased standard deduction. Single filers will have a $12,000 standard deduction in 2018 vs. a $6,350 standard deduction in 2017. Married couples filing jointly will have a $24,000 standard deduction in 2018 vs. $12,700 in 2017. Personal exemptions have been eliminated ($4,050 for yourself and for each dependent in 2017) and the deduction for real estate taxes and state and local income tax (RESALT) is capped at an aggregate maximum of $10,000 under the new code. STRATEGIES FOR CHARITABLE GIVING Many of us are going to find that the new, higher standard deduction and the cap on RESALT mean that itemizing deductions is not the most advantageous way to file in 2018. And perhaps the tax benefit of charitable contributions is lost. Thankfully, most people give because they want to support a cause or receiving organization. And many people can, and still will, itemize. Charitable contributions are still tax deductible if you itemize, and there are several strategies that still make sense in terms of charitable giving this year. Aggregation. If your itemized deductions are close to the standard deduction, consider aggregating several years’ worth of your charitable contributions into one year to exceed the standard deduction and benefit from itemizing. Then use the new, higher standard deduction in subsequent years until you are ready to make an aggregated contribution again. Donation of appreciated assets. Cash donations are easy and are always appreciated. But donating an appreciated asset makes so much sense. 
TIM WALSH, ChFC, CLU, CASL, is a financial advisor and wealth manager with Ameriprise Financial Services. He and his team have provided investment council to AIHA since 2002 and to the American Industrial Hygiene Foundation since 2010.
Support Students through the American Industrial Hygiene Foundation The mission of the American Industrial Hygiene Foundation is to advance the profession by awarding scholarships for funding education and professional development in industrial hygiene and related disciplines. Since 1982, AIHF has distributed nearly $2 million to 680 students studying industrial hygiene and related disciplines at 54 different schools and universities. These scholarships have enabled talented students to complete their education and have encouraged the most promising scholars to enter or remain in the industrial hygiene profession. Information about how to donate to AIHF is available online. Below are testimonials from recent AIHF scholarship recipients. “I am honored that you have selected me as the 2016–2017 recipient of the Bob Wheeler Scholarship. When I received the call telling me that I was selected, I was extremely thankful. By receiving this scholarship, I can continue to pursue my master's degree financially to be one step closer to becoming a certified industrial hygienist.” Samantha D. Knowlton, University of Iowa 2016–2017 Robert W. Wheeler Scholarship Recipient “It is professional organizations such as yours that have enabled me to continue my education and further my professional development. I have truly developed a passion for this field, and that is why I decided to enroll in an industrial hygiene master's program.” Benjamin Weiler, Montana Tech 2016–2017 AIHF Scholarship Recipient “I cannot express how gracious I am to be a recipient of the Real Time Detection Systems Scholarship. This is an honor I have always dreamed of accomplishing. I look forward to the future knowing I have made an impact on professionals such as yourselves.” Abigail Tompkins, University of Iowa College of Public Health  2016–2017 Real Time Detection Systems Scholarship Recipient
Charitable contributions are still tax deductible if you itemize, and there are several strategies that still make sense in terms of charitable giving this year.
We’ve had strong economic and market performance over the past eight or nine years. Perhaps it’s time to look at your portfolio and see if your holdings still make sense for you. If you have large capital gains on an asset that you might be ready to sell, consider using all or a portion of that position to make your (aggregated?) charitable contributions for the year. Giving the asset “in-kind” lets you enjoy the benefit of the deduction if you itemize, and you pay no tax on the gain on the underlying asset. The receiving qualified nonprofit organization gets the full value of the asset and pays no tax on the sale of the stock because of its nonprofit status. The process is easy. Your financial advisor or broker can help you initiate the transfer. If you are planning a charitable contribution this year, gifting an appreciated asset is an excellent tax-avoidance strategy. Qualified charitable distribution from your IRA. A QCD is a transfer directly from your IRA to a qualified nonprofit (such as the American Industrial Hygiene Foundation) without you taking receipt of the funds. A QCD is attractive for many people because the distribution is not recorded as income to the donor at all. There are several stipulations regarding the QCD:
  • A QCD must be made from an IRA. If you have a 401(k), 403(b), or profit-sharing plan, you can set up an IRA, roll assets from your qualified plan to an IRA, then make the QCD from the IRA.
  • You must be age 70.5 or older.
  • A QCD counts against your required minimum distribution (RMD) for the year.
  • You can make the qualified charitable contribution whether you itemize deductions on your tax return or not. QCDs are not tax-deductible. They simply move assets from your IRA to your targeted charity without being taxable to you.
  • You can gift any amount up to $100,000 to the Foundation tax free using the QCD approach. While most charitable contributions are limited by law to 60 percent of your adjusted gross income, this limitation does not apply to QCDs. 
The fact that the QCD is not recorded as income to the donor at all is important for two groups of people: those who are at the threshold of having their social security become taxable, and those who might be nearing the Net Investment Income Tax threshold. (NIIT is an additional 3.8 percent tax due on investment income for tax filers above certain income thresholds.) The QCD allows you to move money from the IRA directly to the Foundation and not have the amount included in your modified adjusted gross income at all. So if you are 76 years old and have $2 million in your IRA plan and are being forced to take $90,909 ($2 million divided by the RMD factor of 22), and you don’t need or want all of that RMD, you can avoid paying tax and make a valuable contribution to the Foundation through a QCD. Simply instruct your IRA custodian or broker to make the QCD directly to the Foundation. PLANNING FOR GIVING There is a lot to consider this year as you do your tax planning and plan for your charitable giving. Everyone’s situation is unique, and tax preparation can be complicated, so consult your tax advisor.