The CARES Act was signed in March of 2020 to help with the negative impacts of COVID-19. Part of the bill was to increase tax incentives for charitable giving to both individuals and corporations. If you can, do not forget to make your donations for 2020 and help those in need!
Are you taking the standard deduction?
It is estimated that nearly 90 percent of taxpayers take the standard deduction. If you are one of those people, you can make a charitable deduction of up to $300 for 2020. For example, if you donate $300 in cash to a qualified organization, your adjusted gross income will be reduced up to $300.
IRS considers qualifying organizations as those that are religious, charitable, educational, scientific, or literary in purpose. (Read more here)
Are you itemizing deductions?
For cash contributions in 2020, you can now elect to deduct up to 100 percent of your adjusted gross income (increased from 60 percent).
What about Qualified Charitable to Distributions (QCD) for your IRA?
QCDs allow IRA owners who are age 70½ or older to directly transfer up to $100,000 annually from an IRA to charity tax free. You can use this contribution to satisfy your RMD for the year up to $100,000. One key component of the QCD is that funds must be paid directly from your IRA to the charity.
The CARES Act allows a similar benefit to QCD for those over 59½. They can contribute the cash to charity and take a charitable deduction up to 100 percent of their AGI for the tax year. Many clients like to use RMD’s for charitable donations instead of cash and check payments.
If you have any questions or would like to know if this may be a smart strategy for you, please reach out to me at firstname.lastname@example.org.
Please consult your financial advisor regarding your specific situation. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.