In December, many nonprofit organizations benefit from donors’ year-end contributions. Even during a pandemic year, opportunities have been created in 2020 to encourage donors to support their favorite charities.
In 2018, the Tax Cuts and Jobs Act became effective. The act increased the standardized deduction amount and capped deductions for mortgage interest and state and local taxes. The result was fewer individuals able to itemize their taxes, leading to fewer receiving a tax benefit for charitable contributions. FreeWill notes 30% of taxpayers itemized their taxes in 2017 compared with an expected 10% of itemized taxpayers in 2021.
The CARES or Coronavirus Relief Act passed in spring 2020 provided an incentive for all taxpayers to donate to charity, regardless of whether the individual itemizes or exercises the standard deduction on their taxes. The CARES Act allows all taxpayers to take a tax deduction for charitable gifts up to $300 made in 2020.
The rise in the stock market, coupled with reduced money spent on entertainment and travel this year, has created more wealth for some individuals. This may prove to be another giving opportunity for donors, particularly those who may find an advantage in making a non-cash gift, such as through stocks or mutual funds.
For individuals age 70 ½ and older, making a charitable contribution up to $100,000 through an IRA is tax-free. It also reduces the individual’s IRA balance and taxable income for future years. For these donors, non-cash gifts offer greater tax incentives than cash gifts.
Many donors want to support your organization’s needs but do not always know the best way to do so. Helping donors understand the benefits of making a gift this calendar year will help strengthen their trust and support to your organization in future years.