It’s the time of year to think about how you express gratitude. Some people donate their time or money to a charitable organization, especially around the holidays. In 2019, Americans gave an estimated $450 billion to U.S. charities1, and this number was expected to rise in 2020 before the pandemic hit. This year, there are some special opportunities for charitable giving before year-end that you can potentially take advantage of.

The CARES Act created some charitable giving opportunities for 2020.

  • If you itemize your taxes, you can deduct all of your cash donations, up to 100% of your income in 2020. Typically, the limit is 60% of your Adjusted Gross Income (AGI).
  • If you take the standard deduction instead of itemizing your taxes, you can deduct up to $300 in charitable donations made in 2020.
  • If you are a business owner, there are additional opportunities for giving. For 2020, businesses can deduct up to 25% of qualified charitable cash contributions from their taxable income in 2020, up from the usual 10% limit.

If you feel lead to donate to organizations that provide food to the needy, you can receive additional tax benefits. Food insecurity has been an issue facing many Americans. Unfortunately, the pandemic and subsequent economic crisis has added millions more to the list of Americans who don’t have enough to eat.

  • The tax deduction available for food donations has been increased from 15% to 25% for the 2020 tax year.
  • Anyone can donate food to their local food pantry in 2020 and claim the value of that food on their taxes.

As you look at your overall financial plan, you can make decisions about leaving assets to charity. You have the option to leave your retirement account to a charity after your passing, in any year. You can leave some or all of your IRA to a qualified charity by naming it as a beneficiary. An IRA balance left to charity avoids estate taxes and is removed from your overall estate. And of course those age 70 ½ or older can give money from their IRA directly to charity, and not pay tax on the distribution (Qualified Charitable Distribution/QCD).

It is the season of giving, and there are ways that charitable giving can help reduce your tax burden. This year there are special charitable giving opportunities you may be able to take advantage of, as well as ways to make charitable giving part of your overall retirement plan. These can be complicated, but when done right can help you give to a cause you believe in while working to reduce your tax burden in the long-term.

1 https://home.treasury.gov/news/press-releases/sm1040