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TIME IS RUNNING OUT FOR A 100% TAX DEDUCTION: MAKE A GIFT AND ELIMINATE YOUR INCOME TAX IN 2020

January 8, 2021

The CARES Act provides a once-in-a-lifetime opportunity for charitable giving. It allows donors to deduct up to 100 percent of their adjusted gross income. Gifts must be made by Dec. 31, they must be made in cash, and they must be made to a qualifying charity (not donor advised fund).

Eliminating the AGI cap may benefit charities this year, accelerating the timing of donations that might otherwise have been given over the next few years. Given the important work nonprofits are doing in the pandemic and the financial pressure they are under, accelerating donations might be a win-win.

Americans have responded to society's current challenges with extraordinary generosity. Other CARES Act provisions they may find helpful this giving season:

  • A universal $300 deduction for taxpayers, whether they itemize or not. With the CARES Act, if you donate up to $300 in cash to a qualified organization, your adjusted gross income will be reduced up to $300.
  • Required minimum distributions from most retirement accounts are suspended, helping with charitable distribution from an IRA or 401k.
  • Donors age 59+ who have been adversely affected by COVID can withdraw up to $100,000 from their retirement accounts without incurring a penalty. They'll have to pay income tax on the withdraw--unless they use these resources to reach the 100% charitable deduction.
  • For businesses, the new law also increases the limit on the deduction for charitable contributions from 10 percent to 25 percent of a corporation’s taxable income.

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