The CARES Act provides a wide array of temporary tax benefits to encourage individual and corporate charitable giving to the Neponset River Watershed Association (NepRWA) during the 2020 calendar year.
With 31% of all annual giving occurring in December I hope you find the following information helpful to make a wise and thoughtful year-end giving decision. You may want to discuss some of the ideas below with your tax advisor.
To learn more about how your gifts can make a lasting impact, please contact NepRWA Development Director, Dee Mullen at email@example.com or 781-575-0354 x303.
- Deduct $300 without itemizing
This year only you can deduct $300 of charitable gifts without itemizing. The $300 limit is one per tax filing unit. Also, this must be a cash gift paid to an ‘operating nonprofit’ (therefore, it cannot go to a donor advised fund).
- Deduct up to 100% of your income
This year only you can deduct up to 100% of your adjusted gross income using charitable gifts of cash. However, these gifts must go to an ‘operating nonprofit’
(therefore, they cannot go to a donor advised fund)
- Make IRA gifts at 70 ½ +
IRA accounts have no required minimum distribution (RMD) in 2020. But those age 70½ or older can still make gifts directly from an IRA to a nonprofit up to $100,000. This gift donates pre-tax dollars. The earned income is never taxed because it goes directly to the nonprofit.
- Move your 401k/403b into an IRA rollover now to prepare for future IRA gifts
RMDs will return next year for those age 72+. A qualified charitable distribution from your IRA or IRA rollover reduces RMD. It’s a great way to give!
- To do this with a 401(k) or 403(b), you must first convert the account into an IRA rollover. But conversion requires first taking any RMD from the 401(k) or 403(b). You must pay taxes on that distribution.
- You can avoid that by making the conversion this year. There are no RMDs in 2020. So, you can convert your 401(k) or 403(b) into an IRA rollover. And you can do it without paying any taxes, even if you are age 72+. Then, you’ll be set up to make future donations from your IRA rollover whenever you want.
- IRA gifts @ age 55 – 70½
IRA withdrawals during this age create no penalties. But they are taxable. However, this year cash gifts can be deducted up to 100% of income. If you are already itemizing deductions this can help offset the tax impact from an IRA withdrawal.
- Corporate Giving
Corporations may increase their limit on charitable deductions up to 25% of their taxable income. Previously the charitable deduction limit for corporations was 10% of taxable income. This can be an opportunity for businesses to increase their impact on the community they serve by increasing their corporate giving in this critical time.