As 2020 begins winding to a close, it’s a good time to evaluate any financial to-dos left unchecked. The last few months of the year are a great time to look at your charitable giving and decide if there’s more you can do before Dec. 31 rolls around. Not only does the holiday season present the perfect time to do what you can to help those in need, but any charitable giving you do now will also offer beneficial tax implications come April 2021.
Not sure where or how you can give? Consider these ideas:
- Year-end donations – Given the whirlwind that 2020 has brought with it (job loss, increased bills, etc.), donations are needed now more than ever. The government knows this, and they’ve incentivized year-end donations in hopes of encouraging more Americans to give. By giving in 2020, you’ll owe less in taxes when you file in 2021.
- $300 above-the-line deduction – Aimed at incentivizing giving, the CARES Act allows a $300 above-the-live charitable donation deduction on your taxes. Geared toward givers who don’t itemize their deductions, this means that those who donate up to $300 in cash to a qualified organization can reduce up to $300 from their adjusted gross income and still take the standard deduction. Remember, this deduction only applies to cash donations made to qualified 501(c)(3) organizations, so be mindful of where you send money if you want to claim the deduction. The IRS.gov site has a database with every qualified organization, which you can search to make sure your charity of choice qualifies.
- Over $500 itemized – For those who do itemize their deductions, the CARES Act has also upped the allowable deductible amount of donations from 60 percent to 100 percent of your adjusted gross income. So, in theory, if you donate 100 percent of your yearly income to qualifying organizations, you could owe $0 in 2020 taxes.
- What else/where can I donate? Although there’s always need for cash donations, there are plenty of other ways to donate to our community, too:
Stocks: Did you know you can donate stocks to charity? Many organizations (charities, schools, hospital, etc.) will accept stocks as gifts. Contact the organization you’d like to donate to, and they will likely put you in contact with their brokerage firm.
Cars, boats, RV, etc.: Some larger organizations will coordinate with local agencies to facilitate donations for your large vehicles to benefit those in need. One great organization to consider when donating your vehicle is Wheels for Wishes, benefitting the Make a Wish Foundation. Visit their website to see how your donated vehicle can be turned into funding to grant wishes to kids facing critical illness. Wheels for Wishes will coordinate a no-cost drop-off or pickup of your vehicle and, for tax purposes, will send you a receipt to use to claim your donation when you file.
Clothing, some furniture and household items: Your local Goodwill or Salvation Army will accept donations of most new or gently used clothing, household and decorative items and some small furniture. It’s always wise to check the organization’s website or give them a call to ensure your items will be accepted. Goodwill also provides this value calculator for donated items (keep in mind, this calculator assumes your donated items are in good condition). By law, the charitable organization cannot estimate the value of your donation. You will do this. If you believe your donation is valued at more than $500, you’ll need to complete IRS Form 8283. And if you believe the fair market value of your item(s) is valued at more than $5,000, you’ll need to provide a certified appraised value of the item(s) and then have the charitable organization complete Part IV of Section B of your IRS Form 8283. As always, check with your financial advisor if you have any questions.
Have any questions about year-end giving and resulting tax implications?
Have any questions about year-end giving and resulting tax implications? We’re here to help! Give us a call at 573-447-1777.