5 Things to Know About Year-End Charitable Giving

In 2019, Americans gave an estimated $449.64 billion to charities and this year likely will see similar or greater donations. This is the season to be generous, especially with the added need of many resulting from the pandemic. Donors may be rewarded for their giving by receiving tax breaks.

1. You can take a deduction even if you don’t itemize

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. You can’t deduct leave-based donations

If your employer offers a leave-based donation program in 2020 in which you donate your unused vacation, sick, or personal days to benefit COVD-19 victims, you aren’t taxed on the donation (it won’t be reported as taxable compensation to you) provided the employer makes cash payments before January 1, 2021 to a charity providing COVID-19 relief. But your employer, not you, gets to take a charitable contribution deduction for the donation.

3. You can take a bigger itemized deduction for 2020

Usually, cash donations are deductible up to 60% of your adjusted gross income (AGI). However, for 2020, you can elect to deduct such contributions up to 100% of AGI. Again, substantiation rules apply.

4. Donations of appreciated securities avoid capital gains

If you want to make gifts to charity, consider using appreciated stock or other property held more than a year that’s increased in value. The charitable contribution deduction is based on the fair market value of the property on the date of the donation. And there’s no capital gains tax on the appreciation since the time you acquired it.

Special AGI limits apply to property donations. What’s more, if you’re donating property other than publicly-traded securities, you may need a qualified appraisal to take any deduction.

5. Last minute donations can be done by credit card or check

If you wait to the last minute but want your donations to count for 2020 tax purposes, you have options to act by midnight of December 31, 2020: charge the donation to a credit card or mail a check. The charged donation is deductible for 2020 even though you don’t pay the credit card bill until 2021. And the check by mail is deductible in 2020 even though the charity doesn’t receive it or cash it until 2021.

Conclusion

Be as generous as you want and can afford. But keep take rules in mind so that you can benefit from your charitable giving.