Last fall, the IRS released the new tax brackets for 2025, some of which will have an impact on an individual’s or couple’s charitable intentions. It’s probably time to examine that “check engine light” to see if a tune-up is needed.

Under current laws, many important tax items such as the standard deduction are now indexed for inflation. Each year, the IRS looks at the inflation rate and adjusts several key numbers accordingly.

In 2025, the Standard Deduction will rise to $30,000 for a married couple filing jointly, and $15,000 for a single individual. For someone calculating deductions, meaning all donations/charitable gifts, mortgage interest as well as state and local taxes, and the total falls below the Standard Deduction amount, most people take the standard deduction. Here’s the caveat: when taxpayers take this Standard Deduction, they cannot also deduct charitable gifts. The Standard Deduction is, in effect, a bundled deduction. The Congressional Budget Office (CBO) estimates that around 87% of households take the standard deduction.

It’s likely in a majority of households, the person who does the heavy lifting  every year to gather all those receipts, banking, tax, and expense information did not want to go through the massive hassle of adding it all up. Believe me, I get it. Documenting all the charitable contributions, receipts for purchases for state and local taxes IS time consuming, sometimes even daunting. Let’s put it this way, almost 90% of our nation’s households felt the same way: the standard deduction was fair enough to warrant NOT going down that path. However, every year, this may not be the case. Going on autopilot to take the Standard Deduction doesn’t always fit, especially if you made a significant contribution to a charity, bought a home, car, recreational vehicle, vacation home, invested in a family business, or conducted a major home renovation. You may be giving in to the easy button of tax preparation.

While the matters of tax preparation should always include a professional tax expert who knows your financial situation, I can say that using a community foundation, especially a 30-year local resource like Legacy Endowment to create an endowment fund or endowed scholarship fund, can be a terrific incentive to your tax planning and tax saving efforts. Starting a fund (permanent or non-permanent) can be done with a minimum of $5,000 and, along with other tools like donor-advised funds (DAFs), Charitable Remainder Trusts (CRTs), and Charitable Gift Annuities (CGAs), you could reap significant tax advantages by itemizing charitable deductions.

Since the IRS was compelled to adjust the Standard Deduction for inflation, it’s a sign all other elements built into that bundle probably increased as well. It’s a good year to evaluate whether the Standard Deduction may not be all that helpful to your pocket. When you’re ready to look under the hood with a free consultation regarding your charitable giving options and how to improve your tax savings and basis, we’re here to help, and to provide recommendations and resources that may turn that financial engine’s red light to green.

This is a reprint of Jean Larsen’s article in the Village News on February 6, 2025.

This is part of a series of articles written to share important information about charitable giving and the various ways you can easily support your favorite charities and community.