There are only a few days left in 2020, but you still have time to make a difference in the lives of others—and benefit from a huge tax break.
In March 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act came into play, bringing with it new tax incentives for charitable giving. Now, donors who plan to take the standard deduction ($12k single and $24k couples filing jointly) have the option to claim an above-the-line deduction of up to $300 for cash contributions to charities. Also, if they itemize deductions, donors have the option of electing a 100% of Adjusted Gross Income deduction- limit for cash donations. They can carry these deduction amounts above this limit for up to five years. With both options, donors must make the gift directly to the charities—not to donor-advised funds.
In 2019, donors in the U.S. gave nearly $450 billion to charities—and this year is likely to record similar numbers. There are so many tax breaks when you donate to a charity. Here are five:
1
Deduction Without Itemizing
For 2020, you can deduct cash contributions up to $300 if you claim the standard deduction instead of itemizing. The dollar limit is "per taxpayer unit" so that the same $300 cap applies to singles and joint filers. The deduction isn't restricted to contributions for COVID-19 relief. However, usual substantiation requirements apply (i.e., a written acknowledgment from the charity for donations of $250 or more). This deduction won't apply after 2020 unless Congress extends it.
2
Leave-Based Donations
If your employer offers a leave-based donation program in 2020 (you donate your unused vacation, sick, or personal days to benefit COVD-19 victims), you aren't taxed on the donation—if the employer makes cash payments before January 1. Note: Your employer, not you, gets to take a charitable contribution deduction for the donation.
3
Bigger Itemized Deduction
In 2020, you can elect to deduct cash contributions up to 100% of AGI vs. 60% in other years. Rules apply.
4
Avoid Capital Gains
If you donate appreciated stock or other property that has increased in value, the contribution deduction is based on the fair market value of the property on the date of the donation. There is no capital gains tax on the appreciation since the time you acquired it.
5
Use Credit Card or Check
ou have until midnight on December 31, 2020, to make your last gift of the year. These gifts can be counted even if the charge card donation bill is not paid until 2021; or if the check you write on December 31 does not arrive at the charity until 2021.
