The federal legislation referred to as the CARES Act has created several charitable tax benefits for giving. This could make a difference for you and your loved ones as you start to consider year-end giving and tax consequences. Note these changes seem to be just for this 2020 tax year.
Temporary Universal Charitable Deduction for 2020 Tax Year
This deduction allows taxpayers who do not currently itemize their deductions to claim a charitable deduction for cash donations up to $300 through December 31. The $300 cap applies to individuals and married couples equally, i.e., a married couple would not be able to take a $600 deduction. Donations to donor advised funds and supporting organizations are not eligible for this deduction.
AGI Charitable Deduction Caps Suspended or Increased for 2020 Tax Year
The adjusted gross income (AGI) limits on charitable donations are suspended or increased for cash gifts made by individuals and corporations. The 60% AGI cap for individual taxpayers who itemize has been suspended. Taxpayers who itemize are eligible to take charitable deductions for donations up to 100% of their AGI for the 2020 tax year. The AGI cap for corporations has been increased from 10% to 25% for corporate tax years ending in 2020. Donations to private foundations and donor advised funds are not eligible for the increase or suspension of AGI limits.
While the following is not a benefit, it is worth noting.
Required Minimum Distributions (RMD) on IRAs for 2020.
The CARES Act includes a waiver of the RMDs, but you can still use your IRA to get a tax break on giving to charity. If you normally give to charity, do it with qualified charitable distributions from your IRA. The funds are directly transferred from your IRA to a charity, like your parish, and excluded from income. If there were RMDs, this would go towards satisfying the RMD, but even if there are no RMDs this year, this is a better way to give to charity and reduce your taxable IRA balance at the same time. Only IRA owners and beneficiaries who are age 70 1/2 or older qualify for this, though.
One further thought given the ups and downs with the current market. Several in our diocese have found Charitable Gift Annuities a wonderful way to receive a guaranteed income stream. A person might be surprised by the benefits. One can exchange low-performing stock, CDs or cash for guaranteed life-time fixed payments. If the person makes the gift of an appreciated asset, he or she will not have to pay capital gains when the annuity is funded. Also, Charitable Gift annuitants benefit from a tax deduction this year and a portion of the payments could be tax-free. For a free illustration, contact me anytime at firstname.lastname@example.org or 785-827-8746, ext. 42.
This information is provided for educational purposes only. It is not intended as tax, legal or financial advice. Consult your personal financial advisor or tax attorney for information specific to your situation.