Five Ways to get Tax Benefits from Year-End Giving

October 14, 2020

Even amidst a global pandemic, generous donations continue to lift up charitable organizations worldwide, allowing them (and us) to provide comfort and relief to those they serve. As we prepare for Giving Tuesday and the end of 2020, here are five ways (and tax reasons) to make a charitable gift this year:

  1. The CARES (Coronavirus Aid, Relief, and Economic Security) Act provides opportunities both for taxpayers who take the standard deduction and those who itemize. Taxpayers who take the standard deduction can make up to $300 of charitable contributions, thereby reducing taxable income by up to $300.
  2. Taxpayers who itemize can deduct gifts of cash to public charities to offset as much as 100% of their adjusted gross income (AGI) for the 2020 calendar year (the previous limit was 60%). This means if a donor uses all available deduction for qualified cash gifts, he or she will pay no federal income tax in 2020. If you are a generous donor whose charitable contributions exceed 100% of your AGI, you can carry forward unused cash contribution deductions for up to five years.
  3. The CARES Act also allows corporations to benefit from charitable giving. Typically, corporations cannot deduct more than 10% of their pretax income for charitable contributions. For the 2020 calendar year, this has been increased to 25%.
  4. A Qualified Charitable Distribution (QCD) from an IRA is an excellent way to make a gift this year. By making a gift from one of your most highly taxed assets, it may help lower Medicare premiums and decrease the amount of Social Security that is subject to tax. This is because the gift does not count as income. Since it generates neither taxable income nor a tax deduction, donors benefit even if they don’t itemize deductions.
  5. A charitable fund through a nonprofit is a simple and tax-efficient way to give to your favorite ministries. You direct where you want the earnings to go as part of your gift, and you can contribute to the account anytime and watch it grow tax-free. If you’re interested in this permanent support of your favorite ministries, please call us at 515-974-8927 or email us at info@iumf.org.