You Still have Time to Take Action on some Unique Charitable Giving Opportunities for 2020

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For all GRuB supporters, here’s some exciting news!

2020 has been a challenging year. Perhaps one of the best ways to feel empowered amidst all the problems and troubling events is to take action. Charitable giving is an excellent way to support causes such as GRuB, that make a difference in your community. This year the regulatory, tax, and giving environments have combined to make 2020 one of the best moments in perhaps a decade to efficiently and effectively leverage tax law opportunities to make a difference.

Cash is the most common way people make gifts. In 2020, the CARES Act made gifts up to $300 per person ($600 per couple) deductible even if you do not itemize! Good news for everyone who wants to make a gift!

Perhaps you have a traditional Individual Retirement Account (IRA), which typically creates taxable income when withdrawn. If so, you can convert this to tax-free Roth IRA, which is not taxed when withdrawn. While taxes need to be paid on the portion converted, when combined with a significant charitable gift, the taxable amount may be reduced or nearly erased! Additionally, in 2020, required minimum distributions (RMDs) have been waived, providing additional space to do Roth conversions.

For those with the means of making larger cash gifts, you can now use your gift towards reducing 100% of your adjusted gross income (AGI); usually you can only take a deduction up to 60% of your AGI. If you make a gift that is greater than your AGI, that amount can be carried over into future years – or provide even more space for making Roth conversions. Note that the 100% deductibility provision for cash gifts is only available this year!

If you want to make smaller, annual contributions, you can still employ the above strategy using a donor advised fund (DAF). A donor advised fund is an account you set up for the purpose of making charitable gifts. The gift is deductible in the year it is made to the DAF; however, you determine the timing and amount to be distributed from the fund to your chosen charitable organizations.

While the techniques outlined above can be very beneficial, they should be reviewed to make sure they are appropriate and optimal for your specific circumstances. Before implementing any gifting strategy, make sure to consult with a tax or financial advisor.

Tom McLean, MS, CFP® is a CERTIFIED FINANCIAL PLANNER™ Professional and founder of Advitica Financial Planning LLC. For questions, please contact him at tom@adviticafp.com or 360-292-9314.