Tax rules for donating + different ways to give = special Giving Tuesday Now options
Tuesday, May 05, 2020
Hello Giving Tuesday. No, the world has not gone so thoroughly whack that we've jumped to the Tuesday after Thanksgiving.
Rather, because of the unprecedented, and unexpected, need caused by the coronavirus pandemic, the creators of Giving Tuesday are encouraging those who can afford to give to participate in Giving Tuesday Now. As in today.
This new global day of giving is in addition to the fall event, which has been around since 2012 and is scheduled this year for Dec 1.
Potential charities, philanthropic activities:"We believe that generosity has the power to unite and heal communities in good times and bad," says the Giving Tuesday website. "A global threat like COVID-19 touches every person on the planet, and it presents an opportunity to come together as a global community."
Some suggestions on how to socially connect on #GivingTuesdayNow while still socially distancing include:
- Support healthcare workers by donating supplies, advocating for them, and staying home.
- Give to the organizations that you love most. No amount is too little. Nonprofits struggling to meet growing needs appreciate any and all contributions.
- Help out small businesses by buying gift cards or writing an online review. For especially hard-hit restaurants, order a meal to pick up curbside or have delivered. And don't forget to tip!
- Combat loneliness by reaching out to a neighbor, relative, seniors or veterans.
Changing donation deduction rules: If you're able to contribute to a charity today (or any day), thanks.
Uncle Sam also thanks you with some potential tax breaks, as long as you follow his rules. Some of them have changed recently, with one revision directly attributable to the pandemic.
Here's a look at what you need to know about deducting donations, as well as some out-of-the-ordinary giving options, on this special #GivingTuesdayNow and any other day.
Giving and taxes overview: Let's start with the general Internal Revenue Service contribution rules. There are two key things to keep in mind before you give.
First, make sure your charity is IRS qualified. Only donations to eligible organizations are tax-deductible.
Use the IRS' Exempt Organizations Select Check to make sure the charity is OK. This searchable online tool lists most organizations that are eligible to receive deductible contributions. In addition, notes the IRS, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations even if they are not listed in the tool’s database.
Although the IRS' tax-exempt organization online search tool, formerly known as Select Check if you're a veteran tax geek, is not strictly a form, it is an official IRS digital document. So it earns this week's nod in the Tax Forms Tuesday list.
Another way to confirm that your chosen charity is nice, not naughty is to check it out on Candid, the merged GuideStar and Foundation Center site, or on Charity Navigator.
You also want to substantiate your gifts. Generous gifts, specifically those of $250 or more, must be acknowledged by the recipient charity. For donations of less than that, you still need some type of written confirmation.
Reputable nonprofits know this rule and send you proof of your donation, either immediately or early in the following year as you're getting ready to do your taxes You generally don't have to send the receipts with your tax return, but if the IRS questions your claim and you don't have documentation, it could disallow the deduction.
The many ways to give: After you've selected your qualified charity, the next major consideration is how to best do so.
The easiest and most popular giving option is by cash. This isn't just dollars and cents. For donation tax purposes, it also means gifts by check or credit card. You can mail in your gift or, since most charities are online, donate electronically.
This year, the Coronavirus Aid, Relief and Economic Security (CARES) Act expanded the tax break for cash donations. If you claim the standard deduction, you'll be able on your 2020 tax return to claim an adjustment to income, still known by many (including me) as an above-the-line deduction, for a cash donation of up to $300. Wealthier donors also can give more and itemize those amounts.
But you aren't limited to cash. The tax code recognizes that there are many atypical ways to support charitable groups.
Take, for example, your portfolio. If the stock market's crazy reactions to the COVID-19 outbreak has prompted you to review your holdings, consider giving away appreciated stock of them rather than simply selling.
Even with the market's many downturns, your holding still might be worth more than it was when you bought it all those years ago. If you sell, you'll owe capital gains tax of 15 percent or 20 percent depending on your income level on your profit. But if you give that stock to your favorite charity, you get the deduction based on its value.
The charity won't mind. Since it's tax-exempt, it can sell the appreciated stock you donated without any tax implication. Most nonprofits are comfortable with this option and can help you make such a donation, after, of course, you talk with your tax and financial advisors.
Then there are older philanthropists, who have a special donation option. If you must take a required minimum distribution (RMD) this year, consider giving that retirement withdrawal amount to charity instead.
Remember, the retirement act that became law in December 2019 changed this year the effective RMD age from 70½ to 72. But it left in place the option for those who must take RMDs to directly donate up to $100,000 of those amounts to a qualified charity.
This move, officially known as a qualified charitable distribution (QCD), works if, of course, you don't need the money to cover your living expenses. It also allows you to meet the RMD requirement, but not have the distribution count as taxable income when you directly donate it a charity.
Give of your time. Yes, volunteering can be dicey during a pandemic. Even if your state and local officials have loosened lock-down rules, it's still a good health practice to socially distance.
You can still do that by, for example, volunteering your time as a driver who drops off meals for the disabled and elderly homebound. The time you spend on the road doing this good deed is not deductible. However, the miles you drive can be counted as a charitable donation at 14 cents per mile.
Give early, give often, give: Remember, all these giving opportunities and possible tax deductions are around beyond #GivingTuesdayNow. So if you didn't get around to donating today, no worries. Any time you're able to give is fine.
And if you find you need some extra help, ask for it. Apply for it. Accept it. Don't be too proud. Take care of yourself and your family. When you're back on firmer employment and financial ground, you then can repay the help you get now by giving back as you can.
Unfortunately, with or without COVID-19 considerations, many of us still will need help. Day in and day out, every single year.
You also might find these items of interest:
- Donations, deductions, options & possible tax-law changes
- Giving Tuesday tips to maximize your donations & deductions
- Spring cleaning could help cut your tax bill when you properly value donated goods
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.
Good article encouraging donations and the tax rules. You will also find of interest this article/blog I wrote on Forbes site: Donating Your Stimulus Check: 4 Key Tax Rules To Know
URL Link is: https://www.forbes.com/sites/brucebrumberg/2020/04/20/donating-your-stimulus-check-4-key-tax-rules-to-know
Posted by: Bruce Brumberg | Wednesday, May 06, 2020 at 08:09 AM