Time to Give Thanks: Charitable Giving Before the Year’s End

You\’re probably looking forward to Thanksgiving, even if it looks a bit different this year or you\’re not a big fan of turkey. Whatever your Thanksgiving is like this year, it’s a good time to think about how you express gratitude. Some people donate their time or money to a charitable organization, especially around the holidays. In 2019, Americans gave an estimated $450 billion to U.S. charities[1], and this number was expected to rise in 2020 before the pandemic hit. This year, there are some special opportunities for charitable giving before year-end that you can potentially take advantage of. 

Tax-Free Donation Limit Increase for 2020

The CARES Act created special opportunities for charitable giving only for the 2020 tax year. Normally, there is a cap – 60% of a taxpayer\’s Adjusted Gross Income (AGI) – on how much someone can donate to charity tax-free. The CARES Act raised this limit to 100% of AGI for the 2020 tax year.[2] Contributions over this amount can be carried forward for five years subject to the usual 60% of AGI limit in those years.[3] There is also a provision that allows single filers who don’t itemize to deduct up to $300 in charitable donations, and married couples filing jointly to deduct up to $600.^[4] The deadline to make charitable contributions for 2020 is December 31^st, so mark your calendar. Note that these provisions only apply to cash donations and to not donor-advised funds or gifts to 509(a)(3) supporting organizations.[5]

Incorporating a Giving Strategy Within Your Estate Plan

Another potential option for giving is taking advantage of the annual gift tax exclusion limit of $15,000. You don’t have to itemize your taxes to do this. This means you can gift up to $15,000 a year tax-free per person each year.[6] This can be one way to reduce your taxable estate and give to your loved ones during your lifetime. Note that what you give tax-free counts towards your total gift and estate tax exemption limit, which is $11.58 million for individuals and $23.16 million for married couples in 2020.[7]

Watch Out for Scams

Many charities are stepping up to help those in need during the COVID-19 pandemic, but scams have also proliferated. It’s important to make sure you are giving to a legitimate charity, and there are several ways you can do so. One is to research the charity online to check on their reputation. You should also check that it\’s not a fake organization with a name very similar to a real charitable one. You can also check the IRS\’s Tax Exempt Organization list to see if donations are tax-deductible.

If you’re not sure if your retirement plan is as well orchestrated as your Thanksgiving dinner is, maybe it’s time we talk. Whether you want to give to a charity, retire earlier, or maintain your current lifestyle, we want to help you create a retirement plan that makes you feel thankful and helps to achieve your retirement goals. Schedule a time to meet with us to hear more about your retirement planning options, and have a Happy Thanksgiving!