New Opportunities for Charitable Giving Under the CARES ACT of 2020
Under the Cares Act of 2020, we have been given a one-year opportunity to make a difference for a nonprofit of your choice while minimizing your tax liabilities.
You can donate cash up to 100% of your 2020 Adjusted Gross Income and wipe out any income tax due in 2020. Any deduction over the AGI can be carried forward and deducted in future years. If you might have a large capital gain from the sale of a capital asset or will have a huge infusion of income this year, this is a great advantage for you and an opportunity to help an organization you care about.
Another way to think about this opportunity is to donate a larger amount this year which may allow you to itemize this year where you normally would only qualify for the Standard Deduction. You can donate an amount this year equal to what you would have allocated to donate over the next several years. This can make you eligible to itemize this year and take the full deduction and go back to the Standard Deduction in years going forward. Nonprofits need the money today! Make a difference now!
Many people have contributed to Donor Advised Funds and Community Foundations over the years. Those contributions were deductible in the year the contributions had been made. Often, owners of these Donor Advised Funds just keep them and let them reinvest and rarely take the time to decide how to use those funds to benefit others. Now is the time to look at donating some of that fund. Now is the time to donate to the charity of your choice with funds already set aside for that purpose. Money sitting in the Donor Advised Funds cannot benefit anyone and are no longer deductible to you.
If you don’t use Schedule A to itemize but rather go with the Standard Deduction, you can now deduct up to $300 of a cash donation. It has been suggested by many that people use their funds from the stimulus checks this year and donate this amount.
In addition, if you are over age 70 ½ you can skip taking your Required Minimum Distribution this year. Instead, you can choose to have your IRA send the equivalent amounts to a charity and you won’t have to pay tax on this distribution.
So 2020, while being a trying and painful year, can be the year you can make a difference!