Changes in 2020 Tax LawsA Simple Explanation of the Advantages of Charitable Giving in 2020
When it comes to your charitable giving in 2020, there’s good news.
Due to the financial impact of the COVID-19 pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act earlier this year. Section 62(a)(22) of the CARES Act includes specific income tax advantages for tax years beginning in 2020.
The Tax Advantage of Charitable Giving
You can get a tax break when giving to a 501(c)(3) public charity. When your Qualified Charitable Distribution (QCD) is made directly from your Individual Retirement Account (IRA) to Pinellas Community Foundation, you can take up to $100,000 or 100% of your donation (up from 60% in previous years), right off the top of your Adjusted Gross Income (AGI).1
No RMD Requirement
If you are 70 ½ and have an IRA, for 2020 there’s no mandatory Required Minimum Distribution (RMD) from your IRA. You may still choose to take what would be your RMD and donate it directly from your IRA to Pinellas Community Foundation for income tax purposes. This allows you to deduct up to $100,000 or 100% of your 2020 AGI.
The Advantage of Charitable Giving if You Don’t Itemize
Under new Sec. 62(a)(22), for tax years beginning in 2020, you may deduct up to $300 in qualified charitable contributions made to qualified charitable organizations. Any amount that exceeds the $300 limit may not be carried forward to future tax years or claimed as an itemized deduction.
You may have a favorite charity or charities to which you give consistently each year. Under the tax laws in place just prior to 2020, you were not eligible to itemizing. By ‘bunching’ may help qualify for itemizing in 2020.
Bunching, or rolling several years of donations into one year, can optimize your tax savings by qualifying you for the annual standard deduction. When you put your donation into a donor-advised fund at PCF, you can ‘bunch’ your funds into one year and instruct PCF to distribute the donation to your favorite charity as you wish.
To receive a 100% deduction from your Adjusted Gross Income (AGI), your Qualified Charitable Distribution (QCD) must be a cash gift sent directly from your IRA to a public charity.
- John McKinley, Luke Richardson, and Jonas Lee. “The New Charitable Deduction for Nonitemizers.” Journal of Accountancy, September (2020). https://www.journalofaccountancy.com/issues/2020/sep/cares-act-charitable-deduction-for-nonitemizers.html
Time to Act
With less than 60 days left until year-end, it is time to talk decide how you can optimize your charitable giving.
Pinellas Community Foundation is always ready to work with you, or you and your professional advisor, to realize your dreams and a tax savings on your charitable giving.
Suzanne Ruley, CFRE, CFRM
Director of Development