by Josh Frankel, CFP®
Executive Vice President
Portfolio and Wealth Management
A client recently said, “2020 is the gift that keeps giving.” This certainly was a facetious statement, undoubtedly referring to the seemingly endless number of obstacles we have all experienced. After sharing a few stories of the year, our conversation eventually transitioned to how they could support their favorite charities that have been impacted by the events of 2020.
Fortunately, there are several planning opportunities for charitable giving with the remaining days in 2020 which can also be tax-savvy moves. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, provides several tax benefits when donating to qualified charities in 2020, including:
Allowing for up to $300-per-taxpayer in an above-the-line deduction for charitable gifts made in 2020. This means that donors can lower their tax bill even if they take the standard deduction.
For those who itemize their tax returns, increasing the existing cap on charitable cash contributions to qualified charities to 100 percent of income for individuals (up from 60 percent), and for corporations to 25 percent of income, (up from 10 percent). Individuals can also use appreciated stock to lower their taxable income up to 30 percent of their adjusted gross income. Further, those who make this 100 percent of AGI election can also carry forward unused qualified cash gift deductions up to five years. The carryforward will be subject to the 60 percent of AGI limit, as will cash deductions carried forward from past years. A five-year carryforward also exists for unused qualified gift deductions of long-term appreciated assets up to their regular limits.
Waiving all required minimum distributions (RMDs) from retirement accounts in 2020. Individuals over the age of 70 ½ can still donate up to $100,000 directly from their retirement accounts to qualified charities in 2020. Thus, even though an individual may bypass their required distribution in 2020; they can still use the account to make charitable gifts.
Beyond the CARES Act, a donor-advised fund (DAF) is also a great option for those needing a year-end tax deduction and want the flexibility to give to charities later. Donors can contribute cash, appreciated stock or other assets to a DAF. There are other options to consider and we encourage you to have a conversation with your portfolio manager, client relationship associate and your tax professional about year-end planning.
Despite 2020 being “the gift that keeps giving,” recent data suggests that individuals have been incredibly philanthropic this year. According to a Charles Schwab article, in the first half of 2020, they experienced a 46 percent increase in dollars granted and a 44 percent increase in the number of grants to charities compared to the prior year. Perhaps donors are in fact the gift that keep giving this year. They are proving that optimism is the only realism and making the most of an otherwise challenging year.
Finally, please also take a few minutes to review the year-end deadlines to ensure your gift is reviewed and processed. Here is a link to Schwab’s year-end giving deadlines.
Ferguson Wellman and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational and informational purposes only and not as a substitute for qualified counsel. You should consult qualified professionals to understand how this information may, or may not, apply specifically to you.