It certainly has been challenging times for everyone for many different reasons. For those of you who are charitably-inclined and financially secure despite everything that has recently transpired, now could be a great time to consider making charitable donations for a multitude of reasons.
Maybe you have more time on your hands from recent stay-at-home orders, and you’re looking to get more involved in your community. There might be a charity supporting those who have been impacted by recent events that you’re interested in supporting. You may know of a non-profit whose operations have been interrupted or whose fundraising events have been canceled. During these times of great uncertainty where many things are out of our control, it can feel really good taking action to help others.
Whatever the reason, there are a lot of different ways to go about giving and the Coronavirus Aid, Relief, and Economic Security (CARES) Act has made now an even more opportune time to give.
Some Different Ways to Give:
- Direct Cash Donation – Writing a check or making a payment online to a charity
- Individuals that itemize can deduct up to 60% of AGI
- Corporations can deduct up to 10% of taxable income
- Direct Stock Donation – Gifting specific shares of stock that you own to a charity
- Individuals that itemize can deduct up to 30% of AGI
- You don’t pay capital gains tax on shares donated
- Donor-Advised Fund (DAF) – Funding a DAF and then making grants to a charity
- Individuals can take a deduction for full market value of contribution to DAF
- Contributions grow tax-free and are disbursed tax-free
- Qualified Charitable Distribution (QCD) – Making a distribution direct from your IRA to a charity
- The distribution is not reported as taxable income and help to offset your RMD
- You’re able to give larger amount using pre-tax (vs. after-tax) dollars
Impact of the CARES Act on Giving:
The CARES Act has greatly expanded the tax benefits of making direct cash donations to charities:
- Individuals who itemize can now deduct to 100% of AGI
- Corporations can deduct up to 25% of taxable income
- Individuals who don’t itemize can now take an “above-the-line” deduction of up to $300 ($600 if married)
So, if you’re interested in giving, we recommend reaching out to your financial planner / CPA now to figure out the best approach for supporting the organizations you care about most. Working with a professional can help to maximize your tax benefits and to ensure your dollar goes even further for the charities in need.