Every day is a good day to give back to the community. In the economic wake of COVID-19, today is an especially good day to give if you’re able. Giving back in 2020 will help non-profits that have been hit hard by the pandemic. Fundraising events have been cancelled or shifted online, creating a loss of expected income. Communities of faith that were forced to halt in-person services experienced a significant drop in giving. Such challenges impact the individuals, communities and causes these organizations serve, many of whom also have been hard hit by this challenging year. It’s a circular problem, and one I’ve seen firsthand as Board Chair of Girl Scouts.
At the same time, those who’ve been able to give have been generous. Charitable giving in many areas has reached historic levels in 2020. During this season of gratitude, we certainly can give thanks for that.
Tax-Wise Charitable Giving
As 2020 draws to a close and you consider your charitable giving options, here are a few things you should know:
- The Corona-virus Aid, Relief and Economic Security (CARES) Act created additional incentives to give this year. It allows 100 percent of itemized donations to go toward adjusted gross income versus the typical 60 percent. CARES also allows an above-the-line deduction for donations up to $300 (in addition to the standard deduction for non-itemizers).
- You can “bunch” donations into one year. That means itemizing 2020 taxes and taking the standard deduction in 2021. Your income, tax-filing status and donation amount are variables to consider with this approach. A Donor Advised Fund (DAF) can be useful for bunching donations; DAF contributions can be made in one year and distributed to charities over several years.
- Those age 70 ½ years and older can deduct up to $100,000 per year tax-free from their IRAs through a Qualified Charitable Distribution, which presents an opportunity to reduce future taxable income and limit beneficiary tax liability.
- If you decide to do a Roth Conversion, the additional tax liability could be offset with a charitable contribution.
If you’d like to further explore and plan tax-smart giving to increase the impact of your gifts, call or email your advisor.