In the Annual Report on Philanthropy for 2020, Giving USA reported that about $471 billion dollars was donated to U.S. charities in 2020, indicating an increase in 5.1% over the total contributions for 2019. If you plan to make donations on this Giving Tuesday, or before the year’s end, there are some things you may want to consider:
Individuals that do not itemize their deductions are not normally able to deduct charitable contributions. There is a special provision, however, for 2021 that allows individuals and those married filing separating to deduct up to $300, and allows those married filing jointly to deduct a maximum amount of $600. Additionally, donations of cash gifts to charities can be claimed up to 100% of AGI (compared to the previous 60% limits.)
Individuals that normally make charitable gifts in amounts that would not make itemizing advantageous may want to consider planning for larger charitable gifts in one year, and then foregoing normal charitable gifts for the following years. For example, instead of making charitable gifts in Year A and not itemizing, an individual could combine charitable gifts anticipated over the next two or three years, including any other expenses that are deductible (mortgage interest, medical expenses, etc.)
Charitable gifts of assets that have appreciated will allow individuals to take the charitable deduction and forego paying capital gains tax on those gifted assets. Additionally, for individuals aged 70-and-one-half years or older with IRAs can directly transfer up to $100,000 each year from their IRAs to qualified charitable organizations; this amount is eligible to be counted towards your required minimum distribution, as well.
For any deductions claimed in 2021, the gift(s) must be made by December 31st. If you would like us to help you evaluate your tax planning, give us a call.
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