It’s been a tough few months for a lot of people, businesses and charities. Charities especially have more people who need their services right at a time when donations are dropping off.
Before year end, here are some ways to maximize your deductions on your tax return plus give when it’s needed most.
Stack up your donations. In order to take full advantage of your donations, your total itemized deductions must be higher than your standard deduction ($12,400 single, $24,800 married filing jointly, $18,650 head of household). Since the Trump Tax Plan raised the standard deduction in 2018 and enacted the SALT restrictions (state and local taxes), more people use standard deductions. That means you lose the charitable tax deduction too. If that’s the case for you, stack up your donations to push them all into one year.
If you want to donate investments that have appreciated in value and you have held for over a year, get an appraisal and then make the donation for the current fair market value.
Use this strategy if you want to make a donation and have stock you plan to sell to do that. Instead, donate the stock at the current fair market. You won’t pay tax, you’ll get a bigger deduction and the charity will get more money.
Win – Win – Win
For 2020 only, you can take both the standard deduction and a $300 cash donations as a deductions. Note that this must be a cash donation to claim the deduction. If you are married filing jointly, you will only be able to deduct $300. It’s $300 per return.
Make sure you are giving to an IRS-recognized section 501(c)(3) charitable organization. Use IRS’s online “Tax Exempt Organization Search” tool to verify whether a group is tax-exempt and whether it is eligible to receive tax-deductible contributions.
Donations you make to individuals are not tax-deductible. Donations you make to personal fund-raising websites that are earmarked for a single person or small group are not tax-deductible.
However, you can deduct gifts to 501(c)(3) groups that solicit donations on those sites.
That’s just one of the tax strategies to use before year end (12/31/2020). Join us for the coaching classes this week. We’ll be talking about year-end tax strategies. If you miss one, you can catch the replay on the following Friday.