Silver linings are hard to find this year, but it’s worth remembering that the CARES Act created important opportunities for you to increase your giving to charitable causes.
Keep these three tools in mind as you think about year-end tax planning:
- Even for taxpayers who take the standard deduction, a reduction in adjusted gross income is available for charitable contributions up to $300 per taxpayer. Donations to donor-advised funds don’t count; nonetheless, this deduction is a great way to fund the Community Foundation’s work through a gift to the Annual Fund or COVID-19 Relief and Recovery Fund or help your favorite organizations.
- Individuals who itemize deductions can elect to deduct donations up to 100% of their 2020 adjusted gross income instead of being capped at 60%. For corporations, the CARES Act increased the cap from 10% to 25% of taxable income. (Again, contributions to donor-advised funds and private foundations are not eligible, but donations to the Community Foundation’s Annual Fund are eligible.)
- For many of you, the waiver of the Required Minimum Distribution for 2020 could create an economic incentive to redirect tax savings to charitable giving. And of course, nothing has changed about the rules for Qualified Charitable Distributions, which permit both itemizers and non-itemizers to direct up to $100,000 from an IRA to qualifying charities without triggering a taxable event. Again, donor advised funds do not qualify for this, but our other funds do, as do many of your favorite charities.