Your Guide to 2020 Year-End Charitable Giving
by Rev. Bill Gruenewald
The year 2020 will be remembered as the year of COVID-19. It has presented many challenges to all of us. But even so, we’ve been encouraged to see that believers across Tennessee have remained faithful in their giving to Baptist causes, even in the midst of the pandemic. Before we flip the calendar to 2021, it’s a great time to review some additional charitable giving ideas and consider whether they would make sense to implement, especially as you think of ways to support your church or other Baptist cause.
For 2020: Above-the-Line Deduction for Cash Contributions
- The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) enacted in March 2020 includes an incentive for charitable donations. For 2020 only, taxpayers who do not itemize their deductions may claim a charitable contribution deduction of up to $300 for the taxable year for cash contributions made to a public charity that is not a supporting organization or donor-advised fund. This new provision does not permit an above-the-line deduction for unused charitable contributions carried forward from a prior year.
- The CARES Act does not explicitly address whether couples filing a joint return may claim $300 each. We are not likely to have an answer until the instructions for the 2020 Form 1040 are published.
For 2020: Modification of the Charitable Deduction Limit
- The CARES Act also expanded the limit on the deductibility of cash contributions made by individuals to a public charity during 2020 from 60% of adjusted gross income to 100% of adjusted gross income. The limit for noncash contributions remains at 30% of adjusted gross income.
- As with the above-the-line contribution deduction for non-itemizers, the change in the charitable deduction limit does not apply to cash contributions made to a supporting organization or donor-advised fund.
Make a Regular Donation
- The easiest way to make a gift is to simply write a check or donate online (if your church has this capability). If your check is postmarked by December 31 or if your online donation is processed by December 31 (note that the time of day may be important), you may be able to take a charitable deduction for the gift, depending on your particular tax situation.
Batching Contributions
- With the 2017 tax bill, Congress raised the standard deduction for individuals ($12,200) and couples ($24,400). Overall this is great for taxpayers, but it does make it a bit harder to take advantage of deducting charitable contributions if your total deductions do not exceed the standard deduction.
- One way around this issue is to “batch” your charitable contributions, meaning that you combine this year’s gifts with what you anticipate giving next year and make both contributions in 2020. You’re basically loading up two years of gifts in one tax year. Thus, you have a higher charitable amount to apply towards your deductions in 2020, which may result in a better result than simply taking the standard deduction.
Give Gifts of Appreciated Assets
- With the improved financial markets, many people now find themselves holding stocks, bonds, mutual funds, or real estate that has significantly increased in value. Selling these assets may create substantial capital gains for the owner.
- However, rather than increasing your tax burden, you can donate the appreciated asset to your favorite Baptist cause. You get a deduction for the full market value of the asset and the charity recognizes no gains when it sells the asset. Win-win!
Required Minimum Distribution (RMD) / Qualified Charitable Distribution (QCD)
- The CARES Act waived required minimum distributions for IRAs and retirement plans for 2020. However, you may still take the distribution if you want, or even have it paid to your church or other Baptist cause. Please note that not all charities are eligible to receive a QCD, so check with them before you make it.
Remember, when the ball drops at midnight on December 31, you will lose the opportunity to take advantage of these strategies for 2020. If any of these ideas interest you, begin the process now to make sure you allow plenty of time for the process to be completed by year-end.
From the Tennessee Baptist Foundation, we wish you the happiest of Christmas seasons as we celebrate Immanuel!
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Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
