NEWSALERT

WHY is 2020 Different from All Other Years?

Thanks to the CARES stimulus package,

  • A taxpayer can donate and claim a deduction for up to 100% of their Adjusted Gross Income for gifts of cash (does not apply to stock gifts or gifts to donor advised funds) . Consider using this to “bunch” gifts for future years (see below about bunching);
  • Those 70 ½ years and older are not required to take a Required Minimum Distribution from their IRA (but you can if you want and it can qualify as a Qualified Distribution to Charity, if done properly). 

WHAT TO DO IN ORDER TO ENSURE YOU CAN CLAIM A CHARITABLE DEDUCTION FOR 2020:

  • For donations of cash (including checks), your donation must be either postmarked or personally delivered to the not-for-profit organization on or before December 31.
  • For donations of stock, your stock must be transferred out of your account on or before December 31.
  • For donations via credit card, your credit card donation must be processed on or before December 31.
  • Note, if you are 70 ½ or older you can distribute up to $100,000 from your IRA/401K/403B directly to a charity, tax –free (note, does not apply to donor advised funds or split interest gifts. Also note, in 2020 you are not required to take a Required Minimum Distribution (RMD))1

DONATING LONG-TERM APPRECIATED SECURITIES CAN PROVIDE ADDITIONAL TAX BENEFITS

  • When you donate long-term appreciated securities, you can claim a charitable income tax deduction for the fair market value of the securities on the date of transfer, no matter what you originally paid for them.
  • You pay no capital gains tax on the transfer.

For example, if the securities originally cost $2,000 and now have a fair market value of $10,000, you do not pay tax on the $8,000 gain and you may claim a charitable income tax deduction for the full $10,000.

Donating Cash vs. Stock

In this example, you see that donating the stock results in no capitals gains tax being paid, a larger itemized deduction, and more money for the charity of your choice.

Option 1 Gift of $10,000 Cash Option 2: Gift of $10,000 stock
Initial cost basis of securities/appreciation Not applicable $2,000/$8,000
Capital gains tax saved or paid, assuming 20% rate1 Not applicable $1,600
Personal income tax savings2 (0.35 × amount donated to charity) $3,500 $3,500
Net Tax savings $3,500 $5,100

Above example assumes 35% tax bracket, a cost basis of $2,000, that the investment has been held for more than a year, and that all realized gains are subject to a 20% long-term capital gains tax rate. This does not take into account any state or local taxes.

No Longer Itemizing? Consider “bunching” donations.

The advice from many experts is to bunch donations so that your itemized deductions go beyond the current standard deduction amounts for 2020 of $12,200 for individuals and $24,400 for joint filers (adjusted annually for inflation). If you do not routinely exceed the standard deduction, you can get over it by bunching donations of stock to a donor advised fund. If you bunch donations into a donor advised fund, you can claim a charitable income deduction this year, and then distribute the monies to the charities of your choice over several years. Click here to learn more about Donor Advised Funds.

Note, certain federal income tax deductions, including the charitable contribution, are available only to taxpayers who itemize deductions, and may be subject to reduction for taxpayers with AGI above certain levels. Deductions for contributions of appreciated property generally are limited to 30% of the donor’s AGI, however, excess contributions may be carried forward for up to five years. If you hold securities with a loss, it is usually better to sell first. By doing so, you can take the capital loss for tax purposes and then donate the cash. In most cases, donating appreciated securities can be a cost-effective way to benefit the charities of your choice. Please consult with your professional advisor to determine your specific situation. For more information contact Lisa Stanger, Jewish Foundation Executive Director, lstanger@jewishnewhaven.org, 203-387-2424, ext.382. or visit us at www.newhavenjewishfoundation.org or www.jewishlegacynewhaven.org

Let's Start a Conversation

The Jewish Foundation can help you explore charitable opportunities that work for you. 

The Jewish Foundation is a trusted and expert resource for charitable gift planning and endowments and serves as a partner and resource for synagogues, local Jewish agencies, professional advisors and donors.

When you make a current gift or leave a bequest to the Jewish Foundation of Greater New Haven, you not only benefit our community, but you can also support the causes that are important to you.  You can designate that your gift be used to provide unrestricted funds to help meet community needs now and in the future or to endow a permanent fund to aid identified programs, your synagogue, agencies, organizations, or initiatives (Jewish or not Jewish, in Greater New Haven, Israel or beyond) that are of particular interest to you and your family.

Lisa Stanger, Esq., Executive Director
Tiberius Halai, Grants and Gift Manager
Beth Kupcho, Scholarship and Philanthropy Manager
Stephanie Licsak, Controller

Jewish Foundation of Greater New Haven
360 Amity Road
Woodbridge, CT 06525
203-387-2424, ext. 382
203-387-1818 (fax)
lstanger@jewishnewhaven.org
Jewishnewhaven.org

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