Here are a few quick tax tips to consider before the year ends:
- The CARES (Coronavirus Aid, Relief and Economic Security) Act allows those that don’t “itemize” their deductions, to benefit from a $300 cash donation to any public charity. The donation comes on top of the standard deduction, which is $12,400 for single filers and $24,800 for those married filing jointly. However, for those who are married and filing jointly, they are allowed only one $300 cash donation deduction. It’s not a lot of money, but charities depend on December donations to meet their budgets and set new ones for the coming year.
- The act also suspends the taxpayers’ adjusted-gross-income limitations for cash donations to public charities. Prior to the act, individuals could only deduct charitable contributions up to 60% of their adjusted gross income. This limitation was raised to 100% for cash donations made to qualified public charities. Donations made to donor-advised funds are not included in this provision.
- One of President-elect Joe Biden’s proposals is to limit the benefit of tax donations to 28% for taxpayers in the upper brackets. For a taxpayer in the top 37% tax bracket for 2020 that itemized deductions, it might make sense to accelerate some of the charitable giving into 2020. The proposal may or may not ever be implemented but some taxpayers may choose to take the 37% benefit now.