End-of-year is coming! And this year-end season is not only a time of holiday cheer but also represents the last chance for many donors to make tax-deductible gifts before New Year’s. And with so many communities facing greater and new challenges due to the COVID-19 pandemic and other challenges, the 2020 end-of-year giving is even more important this year!
Following are important details for you to know regarding the important tax advantages of end-of-year giving.
A gift to a qualified charitable organization may entitle you to a charitable contribution deduction against your income tax if you itemize deductions. You must itemize in order to take a charitable deduction. Make sure that if you itemize, your total deductions are greater than the standard deduction. If they’re not, stick with the standard deduction.
A contribution is deductible in the year in which it is paid. Putting the check in the mail to the charity constitutes payment. A contribution made on a credit card is deductible in the year it is charged to your credit card, even if payment to the credit card company is made in a later year.
Most charitable organizations qualify for a charitable contribution deduction. You can deduct contributions only if they are made to or for the use of a qualified recipient. Keep in mind that contributions to individuals, foreign governments, foreign charities, and certain private foundations similarly are not deductible.
There are limits to how much you can deduct, but they’re very high. For most people, the limits on charitable contributions don’t apply. Only if you contribute more than 20% of your adjusted gross income to charity is it necessary to be concerned about donation limits.
Rules exist for non-cash donations too! If you contribute property owned for more than one year, the value of the deduction is normally equal to the property’s fair market value. And you should clearly contribute, rather than throw out, old clothes, furniture, and equipment that you no longer use. For example, if you bring $1,000 in clothes or furniture to Goodwill or the Salvation Army, make sure that you get a receipt. Never throw such contributions into a bin where no receipt is available.
You need to maintain proper documentation of your contributions. If you want to claim a charitable deduction for a cash gift, then you must be prepared to verify your claim. In other words, you cannot deduct the spare change dropped in a charity’s collection bucket without the proper documentation. If you are audited, the IRS will only accept one of the following to substantiate a monetary gift: a canceled check, credit card statement, bank statement or a written acknowledgment from the charity. If you contribute $250 or more, then you must prove to the IRS that you (a) made the donation and (b) you didn’t receive anything in return for that donation. Therefore you’ll need a receipt from the charity that includes the following information: the charity’s name, the value of your gift, the date you made your donation and a statement verifying that you did not receive any goods or services in return for your gift.
The IRA charitable rollover offers tax benefits for those that qualify. The IRA Charitable Rollover allows individuals who are 70 1/2 years old to donate up to $100,000 to charitable organizations directly from their IRA, without that donation being counted as taxable income when it is withdrawn.
Remember, it’s always better to give than receive, and the beauty of charitable donations is that you give and receive at the same time.To that end, nearly one third of all annual giving occurs in December, and 12% giving happens in the last three days of the year! Don’t let December 31, 2020 come and go without getting your tax advantage!
Hampton University is a bona-fide 501c3… Please contact me at felicia.blow@hamptonu.edu or via 757.727.5350 if you have interest in supporting our stellar students and faculty!
Sources: www.charitynavigator.org; www.nptechforgood.com/2015/09/16/20-must-know-fundraising-and-social-media-stats; www.mrbenchmarks.com; and www.networkforgood.com/digitalgivingindex.