The end-of-year appeals to our better angels are flooding inboxes: Give to the charity that supports orphans. Or feeds the hungry. Or doles out eyeglasses. Or supports the arts.
While that’s typical, one thing definitely is not: 2020.
The pandemic-inspired CARES Act, passed in the spring, includes four temporary tax changes that make it easier for individuals and businesses to donate to good causes this year, the U.S. Internal Revenue Service says. There are some limits, but here’s the broad outline:
Don’t usually itemize? Typically, that means you can’t deduct your giving — but not this year. Cash contributions to bona fide charities — including donations made by check, credit card or debit card, as well as for out-of-pocket expenses related to volunteer work — can be deducted on 2020 income tax returns for folks who take the standard deduction, the IRS said. That means about nine in 10 taxpayers who take the standard deduction could qualify.
Incentive for itemizers who use Form 1040 or 1040-SR? In normal times, givers can only claim deductions for donations that are 20-60% of adjusted gross income. But this year, that limit has been hiked to 100% of adjusted gross income.
Business giving back? Usually, the maximum allowable deduction for cash donations by corporations is 10% of taxable income. That’s increased to 25% for 2020. And for businesses donating food inventory, which is usually capped at 15% of taxable income, the ceiling has been increased to 25% for many.
Here’s some expert advice for tender-hearted givers from the IRS, California secretary of state, Charity Navigator and Guidestar:
- Make sure the organization you want to support is really a charity. Scammers are eager to grab your money. Check if the organization is “exempt,” in IRS terms, by searching at https://apps.irs.gov/app/eos/
- Get the biggest bang for your buck by giving to charities that maximize the use of every dollar. The most efficient spend at least 75% of their budgets on programs and services, with the remaining 25% on administrative and fundraising costs. Charity Navigator does the math for you for many organizations. Guidestar.org has info as well.
- Choose charities where the CEO is reasonably compensated: Just as Wall Street salaries have come under fire, nonprofit CEO compensation has become a lightning-rod issue as well. You’ll find that information at Charity Navigator and Guidestar as well.
- Donate online: Contributions by Internet are one of the cheapest ways for nonprofits to receive donations. You can donate online at many charities’ websites.
- Avoid charities that won’t share information or that pressure you. Reputable nonprofits will discuss their programs and finances freely, don’t use pressure tactics, are willing to send you literature about their work or direct you to a website, and will take “no” for an answer.
- Keep good records! That means receipts, acknowledgment letters, canceled checks and/or credit card receipts. For donations of goods, additional record-keeping rules may apply.
For more information about coronavirus-related tax relief, see IRS.gov/coronavirus.
Source: Orange County Register