The final weeks of the year present an opportunity to balance your charitable giving for the 2020 tax year. Recognizing that individuals and businesses want to support charities in these times of need, lawmakers this year included a new tax deduction for non-itemizers in the CARES Act and modified limits on charitable contributions to encourage donors to give in 2020. This targeted relief recognizes the important role charities play during the pandemic and provides additional tax benefits for taxpayers supporting charities.
This year the following key changes apply:
Donation Limits
- Individuals who claim the standard deduction can take a write-off for donations up to $300.
- Individuals who itemize can deduct cash gifts to the full extent of their entire adjusted gross income (rather than a cap at 60%)
- The contribution limit for corporations has also been raised to 25% of taxable income for charitable donations (rather than a cap at 10%)
Gifts of Appreciated Securities
When you make a gift of an appreciated asset, such as stocks, you can benefit in the following ways:
- Save on Income Taxes: Receive an income tax deduction for the value of the transferred stock.
- Avoid Capital Gains Tax: Since your securities are transferred directly, you avoid capital gains tax regardless of how much your stock has appreciated.
- Support What Matters To You: Your gift is a wonderful way to share your appreciation!
Other ways to make a donation
- IRA Charitable Rollover allows as much as $100,000 from a traditional IRA or Roth IRA each year to be given directly to charity. [You won’t be taxed on the transfer and it counts towards your required distribution.]
- Donor-advised funds can provide you with immediate tax benefits when making a year-end gift.
- Retirement plan assets are a surprisingly easy way to reduce potentially high taxes.
Any charitable contribution exceeding the limits discussed above may be carried forward and used in later years subject to certain limits. The IRS’s Coronavirus Tax Relief and Economic Impact Payments page provides more information about tax help for taxpayers, businesses, tax-exempt organizations and others affected by coronavirus (COVID-19).
