Why Make Year-End Charitable Donations?

According to the Nonprofit Finance Fund, many nonprofits are struggling with increasing demand for services and declining support (due to cancellation of fundraising events and declining donations).

If you've been financially stable, or if charitable giving is important to you, your year-end giving can be essential for many struggling nonprofits.We'll describe the benefits of end-of-year giving, along with great ways to reach your goals.

Why 2021 is a particularly good year for charitable giving

Given the needs generated by the ongoing COVID-19 pandemic and the increased demand for charities, 2021 is a perfect year to donate.

The pandemic led to the Coronavirus Aid, Relief and Economic Security (CARES) Act of March 2020, which is expected to expire in late 2020. The CARES Act allows you to make a $ 300 deduction for cash donations to organizations eligible, even if you donate, don't discriminate.

Eligible organizations must have philanthropic, educational, religious, literary or scientific purposes and be classified by the Internal Revenue Service (IRS) as tax exempt.

According to the IRS, this $ 300 donation reduces your adjusted gross income (AGI) and your taxable income.

Use the IRS Tax Exempt Organizations Lookup Tool to make sure an organization qualifies before contributing.

The CARES Act also encourages large dollar donations, temporarily raising the typical deduction limit for those who specify. Previously, donors could deduct donations up to 60% of adjusted gross income (AGI). In 2020, it is possible to deduct cash contributions of up to 100% of AGI.

If you want to donate income for the entire year, it is possible to do so in 2020.

However, few will benefit from this temporary increase, especially wealthy seniors with low annual incomes who are not dependent on their retirement funds.

Plus, the stock market boom in 2021 could mean you have more to give on valuable assets.

Many states also offer tax deductions for charitable contributions or have their own tax laws. Talk to an attorney or tax professional about your situation.

Reasons to make end-of-year charitable donations

Good reasons to give at the end of the year include the following, ranging from financial benefits to personal satisfaction.

# 1 Take Advantage of Employer Compatibility

Some employers match charitable giving, although they may set limits and deadlines for charitable giving, such as December 31st. You can get a matching contribution even if you are not an employee; Many employers match gifts given by an employee's spouse or a retired employee.

Some companies match rates two or three times what an employee gives. Check with your human resources department for your company's rules and matching rate.

# 2 Generate tax deductions

To count your 2021 taxes, you must make contributions by December 31, 2020.3 In a standard year, you can only deduct charitable donations if you specify deductions. But this year, you can deduct donations of up to $ 300, even if you don't specify it. If you contribute more than $ 300, you can only deduct the excess when itemizing deductions, although most taxpayers take the standard deduction.

# 3 give away

Most organizations offer a way to donate in honor of someone else. This can be a great way to take care of last minute holiday gifts, especially for someone who is hard to buy. However, it may be your responsibility to inform your honoree by card. Check with the website or charity to find out.

Some conservation organizations provide "token adoptions" along with a certificate and stuffed toys, so there are physical (and wraparound) gifts in addition to your cash donation.

# 4 IRA tax offset

This year, the CARES Act eliminated the minimum distributions required for most retirement plans for those over age 70½.

Another option is to donate up to $ 100,000 from your IRA directly to a qualifying nonprofit by December 31. This is also called a Qualified Charitable Distribution (QCD). Although the minimum distribution is not required in 2020, a QCD is a way to donate for a given year without facing the normal tax consequences of an IRA distribution.

Talk to a tax attorney or personal finance professional.

 

We hope you enjoy watching this video about Why Make Year-End Charitable Donations

Source:Retirement Planning Demystified

 

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