As 2020 comes to a close, JAKC wants to ensure you understand the CARES (Coronavirus Aid, Relief, and Economic Security) Act and time sensitive end-of-year tax implications for your generous contributions to support JA kids.
- Universal Charitable Deduction. If you give but don’t itemize on your taxes, you can now deduct up to $300 per person ($600 per married couple) in cash gifts made to qualified charities.
- Increased Individual Deduction Limit. If you do itemize, the limit on the amount of charitable giving you can deduct has increased to 100% of your Adjusted Gross Income. Previously the limit was 60% of your AGI. This is for 2020 only, and the increased limit only applies to gifts of cash, including checks and credit card payments (there are lower limits for gifts of stock or property).
- Increased Corporate Deduction Limit. Corporations may deduct up to 25% of their taxable income for cash contributions to 501(c)3 public nonprofits. This is an increase from the previous 10% limit.
- No Required Minimum Distributions for 2020. If you’re 72 or older and have a traditional IRA, you don’t have to take your Required Minimum Distribution in 2020. This reduces the tax benefits of giving to charity directly from your IRA (a Qualified Charitable Distribution).
Here are a few things to think about as you make your end of year giving choices:
- Maximize the Universal Deduction. If you don’t think you’ll itemize, consider giving at least $300 in cash to the charities you care about before December 31, 2020. That way, you’ll maximize the new Universal Charitable Deduction.
- Consider Bunching. If you have an accountant or financial advisor, talk to them about whether it makes sense to “bunch” your charitable contributions this year. With the increased deduction limit, you may save more money on taxes in the long run by making several years-worth of gifts today and using larger Standard Deductions in subsequent years. Most charities like Junior Achievement of Greater Kansas City have the flexibility to accept “bunched” gifts and split them between current and future years of work in the way that is most meaningful to you.
- Wait to give with your IRA until 2021. If you like to give using your IRA, consider waiting until 2021 when you have to take your next Required Minimum Distribution. That way, your giving will satisfy the distribution requirement, take care of the charities you care about, and lower your taxes.
- Add a gift to your will, trust or other estate plans. If you want to give more to the causes you value but can’t do it today, think about including gifts to the charities you love in your will, trust or other estate plans. It’s a simple way to support the missions that matter most to you.
These are just a few ideas. Your accountant, financial advisor or attorney may have other thoughts. Talk to them before initiating any transaction about the best ways for you and your family to give in 2020. Not sure where to start? JAKC is here to help. Contact Meredith Suarez, Director of Development and Marketing at email@example.com. You can tell us about your situation. And we can share ideas about how you might approach your giving to meet your goals.
Junior Achievement of Greater Kansas City does not render tax or legal advice. Please consult your advisor to make sure the gift you’re considering is right for you.