How to Give to Others During 2020
This photo was taken before flour and yeast disappeared from grocery shelves.
Love. Care. Serve.
Those were three words Pete Fisher repeated during my interview at Human Investing. So simple, yet so energizing. I left the interview hoping for an opportunity to join Human Investing, a Certified B Corp, but most importantly committed to finding a profession that would combine my analytical background with an opportunity to empower others.
That is why I am here writing a blog about the ways we, as individuals, can give to others in 2020. If you are thinking of giving financial aid, there is good news for you. Specifically, in the last month, there have been updates to the tax code which expand charitable deductions for all taxpayers, including those who are taking the standard deduction and those who are itemizing deductions this year. In addition to humanitarian motivations for charitable giving, the changes to the tax code also provide financial incentives.
Give and lower your taxable income even more
This section is useful if you are interested in lowering your 2020 taxable income and donating some cash to help others.
The CARES Act, which passed a few weeks ago, includes a $300 above-the-line tax deduction for cash donations to qualified charities in 2020. This above-the-line deduction is available for taxpayers who use the standard deduction, which is true for most taxpayers. See below for a visual on how this changes a single filer’s tax return:
My advice for lowering your taxable income and donating cash to help others is the following:
Keep your receipts.
Don’t forget to include the donation on your 2020 tax return!
Giving $300 might feel enormous to you, and de minimis for the community. Or it might feel de minimis to you, and impactful for the community. Just remember micro-actions lead to macro changes. Your $300 will go a long way to help your community.
Good news for taxpayers using itemized deductions
The CARES Act also includes an incentive for those who itemize their deductions. In the year 2020, taxpayers can take 100% of adjusted gross income as a charitable deduction. Before this bill passed, itemized taxpayers could take up to 60%. Note: this rule only applies to cash gifts that go to a public charity. Cash gifts to private foundations are still subject to the 60% rule.
Tax planning strategies
Our team of CFP’s and CPA’s is also thinking about more complex tax planning strategies these updates could have on your current tax returns. Individuals are limited to a $100,000 qualified charitable distribution (QCD) from their IRA account in 2020. However, the CARES Act includes financial incentives for taxpayers who itemize deductions that allows them to donate and deduct more than $100,000 from an IRA this year. For example, since Required Minimum Distributions are waived for 2020, individuals could still make a taxable withdrawal and give the cash to a qualified charity. This series of events completely offsets taxable income since there is a 100% charitable deduction this year. This scenario is specific for itemized taxpayers, but it exemplifies the cohesive planning strategies we can discuss to maximize benefits and minimize taxes.
Time is money
If you do not have extra dollars to make charitable contributions, please know there are other ways to give to others this year. For example, you can give your time. To quote my beloved mother, “children spell love T-I-M-E”. Whether it’s organized volunteer work or calling a distant relative, giving of your time is a generous way to donate to others this year.
If you are feeling inspired, visit this article from the Washington Post listing numerous ways to help vulnerable populations throughout the nation. Let us know if you have questions about how to strategize 2020 gifts. We are here to love, care, and serve.