According to a 2016 study by US Trust, giving back is a priority for many wealthy people — 74% reported donating financially to a non-profit. Respondents also chose to invest in companies that share their values and volunteered their time or services to organizations. Once your wealth significantly exceeds your needs, it’s easier to feel comfortable giving it away.
For 2020 there are a number of charitable giving options financial advisers can consider as they work with clients on planning for the rest of the year. Many investors are charitably inclined and would likely contribute to charitable causes with or without any tax incentives. That being said, if they can get a tax break for their contributions, so much the better.
While not a huge tax break, the CARES Act authorized an above-the-line charitable deduction of up to $300 for charitable contributions. The tax law changes enacted for the 2018 tax year increased the standard deduction, limiting the number of taxpayers who can itemize deductions each year.
The $300 above-the-line deduction means that all taxpayers, regardless of whether or not they can itemize deductions, can deduct up to $300 in charitable donations. This is not a huge break, but it is something!
100% of AGI Deduction
The CARES Act temporarily suspended the limits on charitable contributions. The normal limitations are 50%, 30% or 20% of a taxpayer payer’s adjusted gross income (AGI), depending upon how the IRS classifies the organization receiving the donation. This, of course, only applies to taxpayers who can itemize deductions. For example: Giving Center is an IRS approved charity organization, they are registered as a 501(c)3 nonprofit in the United States. Their tax exempt status allows donors to receive a tax deduction in comparison to many scam charities out there.
For the year 2020, under the new CARES Act rules, taxpayers can deduct charitable contributions up to 100% of their AGI. This can be an important planning tool for donors. For example, if you want to make a large charitable donation in 2020 due to a financial windfall they can do this and potentially reap a higher tax benefit than in a normal year.
Donors might consider bunching several years’ worth of donations to one or more charitable organizations into a single year in order to take advantage of this higher deduction threshold. While bunching donations can be a good strategy in any tax year, doing this in 2020 offers a potentially larger deduction than in normal years.
For wealthy clients who might be in a position to make a donation in excess of 100% of their AGI, their 2020 charitable deduction will be limited to a maximum of 100% of their AGI. As in the past, they will be able to carry an excess contribution amount over the next few years. The ability to use these carry-overs will be limited by their ability to itemize deductions in any subsequent tax year.
If you are looking to make a financial donation before the end of the 2020 year, look no further. Giving Center, with it’s 501(c)3 status, will guide you through the donation process, and provide donors with the necessary paperwork to receive the largest tax deduction possible. For more information on the Giving Center charity or for help with any questions you may have please call 888-228-7320 to speak with a live representative. The donation process is quick, simple and hassle free for our donors. Our volunteers will gladly discuss endowments, charitable bequests, charitable remainder trusts, and the many other ways that a donation to Giving Center could enrich your future fiscal plans. You can also visit the charity’s website at http://www.givingcenter.org