Consider changes to tax laws when giving at year-end

It’s that time of year when Americans start thinking about their year-end charitable giving. But in a year when so much was turned upside down, what changes are we seeing in philanthropy?

We highlight a few changes to tax planning below, and include important information on two increasingly popular ways to work with the Community Foundation.

First, consider the host of tax law changes that have occurred:

  1. The 2017 Tax Cuts and Jobs Act increased the deductibility of cash contributions from 50% to 60% of a donor’s adjusted gross income
  2. Charities organized in a trust form can now also take a 60% deduction for cash grants, which can offset the unrelated business income tax on donated assets like S-corps, debt-encumbered real estate, and pass-through interests like LLCs.
  3. The “stretch IRA” has been eliminated and non-spousal beneficiaries of these accounts must now complete their withdrawals in just ten years. However, there’s a work-around: use your IRA to fund a life-income charitable vehicle (like a charitable reminder trust) and have the beneficiary receive income over their lifetime. This also works with life insurance policies.
  4. Most recently, the CARES Act increased the cash donation limit of 60% of AGI to 100%, though only for gifts in 2020. This deduction is not available for cash gifts to donor advised funds.
  5. Don’t forget about “bunching” your donations to achieve savings beyond the standard deduction.