This article was written in collaboration with Gene Gard.
One positive result of the turbulence of 2020 is that tax benefits for charitable giving have become temporarily more favorable for actions taken in this calendar year, thanks to provisions in the CARES (Coronavirus Aid, Relief, and Economic Security) Act. Now is the time to contact your Advisor and make your end-of-the-year giving plans. Consider:
- The income limit for individual donors for cash contributions to public charities (not donor advised funds or intermediary/supporting charities) was increased for 2020. You can deduct cash gifts up to 100 percent of your Adjusted Gross Income (AGI), where the usual limit is 60 percent.
- Those over 70½ can still donate up to $100,000 each year from traditional IRA accounts without incurring tax on the distribution, known as a Qualified Charitable Distribution (QCD). QCDs count towards required minimum distributions, if required. Individuals between ages 59½ and 70½ can take a traditional IRA distribution and then contribute cash up to 100% of AGI, which is similar to a QCD from a tax perspective and normally would be limited to 60% of AGI.
- Most taxpayers do not itemize and therefore take the standard deduction, meaning any charitable giving is not tax deductible. However, there is a new opportunity to donate $300 per year which is tax deductible even for non-itemizers; this is called a Universal Deduction. Unlike other initiatives discussed here, this program is expected to continue beyond 2020.
- The above opportunities apply only to cash contributions to public charities and do not apply to donor-advised funds or other intermediate charities that primarily exist to give money to other non-profits. You are still able to deduct up to 60 percent of AGI for cash donations and up to 30 percent AGI in appreciated assets contributed to a donor-advised fund.
- In all cases, the combination of all charitable giving (cash, appreciated securities, QCDs, etc.) that is deductible cannot exceed 100% of AGI for individuals.
The bottom line is that there are increased opportunities for tax deductible giving in 2020, and it’s wise to consider these opportunities before the rush of year-end. If you don’t typically itemize but are considering a large gift, there are ways to combine several years of giving to strategically meet charitable goals and maximize tax benefits. From increased donations all the way up to a signature legacy giving plan, your Telarray Advisor is always standing by to assist.