New tax laws and strategies can help you maximize tax
People are facing tough financial situations, yet they are still finding ways to help those in need.
There are new reasons to make charitable gifts this year – whether it's to support nonprofits that help people and communities with challenges from the coronavirus pandemic or to provide assistance after disasters such as the Beirut explosion or an active hurricane season.
Tax Deductions for Charitable Donations in 2020
There are five new rules for Charitable Giving 2020. Even though people are struggling financially, many people whose finances have stabilized want to do whatever they can to help out charitable organizations whether it is faith-based or an organization that supports a cause you are passionate about. People are not waiting until the end of the year to make their gifts. "A lot of things are driving people to be generous, and our numbers prove it," says Kim Laughton, president of Schwab Charitable, which runs Schwab's donor-advised funds. From January through June 2020, its donors recommended over $1.7 billion in 330,000 grants, almost a 50% increase in the dollars granted, and the number of grants compared to the same period in 2019. "There's great need out there, and people are stepping up."
How can you give and what are the benefits for you in 2020.
Philanthropy and giving is on everyone's mind," says Dien Yuen, who holds the Blunt-Nickel Professorship in Philanthropy at the American College of Financial Services. Some nonprofits need help now just to stay afloat. "The donors who are quite active are making gifts now and not waiting until later in the year because the nonprofit might not be there later on."
New tax laws and strategies can help you to take additional tax deductions for yourself and provide much-needed funding to your local or national charity.
The new laws included:
New $300 charitable deduction for non-itemizers.
Bunching contributions and donor-advised funds.
A double tax break from giving appreciated stock.
Make a tax-free transfer from your IRA.
Make an extra effort to research charities this year.
New $300 Charitable Deduction for Non-Itemizers
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, created several incentives for people to help charities right away, including a charitable deduction of up to $300 in 2020, even if you don't itemize. Otherwise, you generally need to itemize to take the charitable deduction, which fewer people do since the standard deduction doubled a few years ago – now at $12,400 for single filers and $24,800 for married couples filing jointly in 2020.
The Tax Cuts and Jobs Act of 2017 have made it more beneficial for most taxpayers to utilize the significantly higher standard deduction instead of itemizing deductions for mortgage interest, state taxes paid, and charitable contributions. The 2020 special CARES Act provision now gives a tax incentive to all taxpayers to give at least $300 to recognized charitable organizations during 2020. To receive the deduction, the gift must be made in cash and go directly to the charity, rather than to a donor-advised fund or private foundation.