Tax Planning Insights

If you’re interested in minimizing your tax obligations and maximizing your savings, consider the helpful tips and ideas you’ll find in this newsletter.

Call if you would like to discuss how any of this information relates to you. If you know someone that can benefit from this newsletter, feel free to send it to them.

In this issue: Help Your Favorite Charity With These New Tax Breaks

The CARES Act authorizes several new tax breaks for charitable donations in 2020. Here are three tips to help your favorite charity while receiving a tax break:

Donate up to $300. More taxpayers are claiming the standard deduction instead of itemizing deductions thanks to the 2017 tax reform, which means that charitable contributions aren’t tax deductible for many Americans. The CARES Act, however, allows an above-the-line deduction of up to $300 for donations to qualified charities other than donor-advised funds (DAF) or private foundations. In other words, you get a deduction whether you itemize or not. Any disallowed contribution is carried forward for five years.

Donate up to 100% of AGI. The CARES Act also creates a tax incentive to donate as much of your 2020 income as you feel like giving. The annual deduction for monetary donations is normally limited to 60% of adjusted gross income (AGI). But the CARES Act increases this threshold to 100% of AGI. You can therefore effectively donate as much as you earn. This provision also doesn’t apply to either DAF or private foundation donations. Any disallowed contribution is carried forward for five years.

Businesses can contribute more! Businesses can also increase their giving thanks to two different provisions in the CARES Act. First, it raises the usual limit for corporate donations from 10% of taxable income to 25%. Second, it boosts the threshold for a special enhanced deduction for gifts of food from 15% of taxable income to 25%. Under both provisions, any disallowed contribution is carried forward for five years.

What you need to do. Be mindful that the usual rules for substantiating charitable donations remain in effect, so remember to keep good records. For example, for contributions of $250 or more of cash or property, you must obtain and maintain a contemporaneous written acknowledgment from a qualified organization. It should indicate the cash amount or description of any property you contribute.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.