And Now for Something Completely Practical

My inner economist tends to kick in at the end of calendar and fiscal years with useful tax thoughts.  Back when the standard deduction was lower, some people shifted their itemized deductions, especially charitable contributions and sometimes medical expenses, into one year for which they itemized, and then took the standard deduction the year after.  Now that the standard deduction has been greatly increased, there is a reported 11 percent drop in charitable giving. The standard deduction is $12,000 for singles, $24,000 for joint returns with an extra $1,600 for unmarried filers and $1,300 each on a joint return.  So you might take a look at your itemizable deductions and see how close they are to that figure.  If your total contributions are substantial enough—maybe a big mortgage interest deduction, and/or the maximum $10,000 in state and local income and property taxes, plus charitable deductions—then continue to itemize.

But if your deductions are right on the cusp, you might want to consider bunching deductibles in one year and itemizing the next year.  The easiest ones to move around are charitable contributions. So for 2018 I prepaid my church pledge the end of 2017, focused my contributions in 2018 to nondeductible causes (mostly people running for office), and plan to take the standard deduction.  Most of my favorite deductible charities, an average of about $9,000 a year, can count on two years’ of contributions in 2019, one at the beginning, one at the end, and I will itemize.

As an economist, I view the deductible contribution as a 22 percent federal and seven percent state income tax match to my support of everything from colleges to hunger programs and disaster relief to the arts. As Justice Oliver Wendell Holmes once said, there is nothing wrong with a man (sic) so arranging his affairs as to minimize his taxes. We can have our charitable cake and “eat” the matching federal share by a simple and perfectly legal strategy of moving some of the check writing from one year into another.

 

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