During this time of illness and unemployment, many people have the desire to assist one another. However, the number of Americans giving to charity has reduced due to the pandemic’s uncertainty. As almost every company shifts to remote services, people are struggling to provide food to their families.
On the contrary, the current changes in tax-law might have prevented people from giving. Recently, the number of filers who prefer standard deduction to itemizing has increased, reducing the number of Americans who can reduce their taxes by having deductible contributions.
However, the following strategies can help donors give during the pandemic:
i. Acquire a New Deduction
Willing donors can get a new tax deduction. As a result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act implemented in March, taxpayers getting the standard deduction can also formally request $3000 in benevolent deductions. However, they must give their money to a nonprofit organization- 501(c) (3).
ii. Give Directly To the Needy
Although it might become difficult for people to get givable gifts, donors can establish the real meaning of gifting. Rather than giving to nonprofit organizations, donors can give directly to the needy. However, they should remain vigilant of online appeals that they cannot verify or those from strangers because the number of scammers taking advantage of this opportunity has increased.
iii. Utilize IRA
People aged 70 and above qualify for a significant tax break. Therefore, similar to a common IRA withdrawal, they can donate from IRA to charity without referring to the amount as taxable income. However, donors should address the checks to the charity.
iv. Donate Assets
People can make donations to charity in the form of assets rather than cash. For example, if a person’s mutual funds or stock shares have increased in value, or someone has had shares for a whole year, they can donate them without paying tax on capital gains.
v. Accumulate Gifts
In 2020, the standard federal subtraction, applied in place of itemized deductions, reached $24 800 and $12 400 for couples and single tax filers, respectively. For example, suppose a person’s deductions, including medical care and mortgage interest, nearly match their standard deduction. In that case, they can give extra charitable gifts and receive a considerable tax cessation by itemizing.
Sharing is caring. While the pandemic has resulted in devastating economic fallout and affected everyone, willing donors can find the cause to make the most significant impact. They can donate to people in need directly or through nonprofit organizations and businesses helping suffering individuals during the pandemic.