As 2020 draws to a close, many of our supporters may be making arrangements for their year-end charitable contributions.
Given the tumultuous year this has been, I wanted to make the SCI Community aware of some new tax incentives made available by the CARES ACT that was passed earlier this year.
- New Deduction Available: Up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. This is available only to people who take the standard deduction (for taxpayers who do not itemize their deductions). It is an “above the line” adjustment to income that will reduce a donor’s adjusted gross income (AGI), and thereby reduce taxable income. A donation to a donor advised fund (DAF) does not qualify for this new deduction.
- New Charitable Deduction Limits: As part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions. Individuals can elect to deduct donations up to 100% of their 2020 AGI (up from 60% previously). Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%. The new deduction is for gifts that go to a public charity, such as U2FP.
- Make a Gift from your IRA: Required minimum distributions (RMD) that would have had to start in 2020 do not have to start until 2021, including distributions from defined benefit pension plans and 457 plans. Making a QCD (Qualified Charitable Deduction) this year will still allow itemizers and non-itemizers alike to direct up to $100,000 from their IRA to charities in a tax efficient manner.
- Stock Donations: If you donate the stock directly to a charity, there's no capital gains tax to pay. Plus, you are still eligible to deduct the full fair-market value of the asset you donated from your income taxes, up to the overall amount allowed by the IRS.
Hopefully, these recent additions to the tax code can help you maximize your giving potential while reducing your tax burden.
Kathy Christopherson serves as the Financial Manager for U2FP and has worked in accounting management for the last 30 years.
With that said, we should note that U2FP is not in the business of providing professional legal or financial advice. Donors should consult with their own advisors to ascertain how these opportunities may complement their own personal, philanthropic and tax planning objectives.
(Sources: Plannedgiving.wish.org, Bloomerang.co blog, fidelity charitable.org)