Making the most of your year-end giving

Making the most of your year-end giving

Maximize your tax benefits – donate by Dec 2020

 

INDIVIDUALS

The CAREs Act makes available two charitable benefits to individuals. 

  • Creates a (temporary) universal deduction for charitable contributions with a cap of $300 for each non-itemizer and $600 for married filing jointly. That means, 9 out of 10 taxpayers (those who take the standard deduction) can take an additional above-the-line charitable deduction on their 2020 federal tax return. 
  • Lifts the existing deduction cap on charitable contributions from 60% of AGI to 100% of AGI for itemizers. Taxpayers can itemize 100% of AGI for charitable contributions (temporarily eliminating the 60% of modified adjusted gross income rule). The CARES Act allows taxpayers to claim a tax deduction of up to 100% of your Adjusted Gross Income for contributions to qualifying charities. The qualifying charities are 501(c)3 public charities and do NOT include private foundations that were excluded from the legislation. It’s also interesting to note that the deductibility cap for donations to Donor Advised Funds wasn’t included, even though they technically qualify as public charitiesFor individuals, this change could theoretically mean zero taxable income if someone gives big.

CORPORATIONS

The CAREs Act increased deduction for charitable Corporation charitable contributions from 10% to 25%. For corporate donors, the limitation on charitable deductions (which is usually 10% of modified taxable income) doesn’t apply to qualify contributions made in 2020 and is 25% for the tax year. 

Another interesting Corporate change for 2020 is extending the limitation on deductions for food donations by corporations increases from 15 percent to 25 percent in 2020.

The window for taking advantage of these changes closes on December 31, 2020. Please consult your accountant or tax preparer for more information about these changes or reach out to us for 

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