The CARES act allows households up to a $600 tax deduction to nonprofits on their 2021 taxes. Otherwise, since 2018, new Federal income tax laws increased the standard deduction which eliminated the tax benefit of making charitable donations for many people unless they are donating a relatively large amount of cash. There are, however, other ways to donate and get tax breaks.
Taxpayers over age 70 ½ who are making distributions from a Traditional IRA can properly reduce their taxable income by making a Qualified Charitable Distribution directly to a charitable, 501(c)(3), organization, like LIFE CARE HUMBOLDT.
Ask your tax professional about the potential benefits of the following options:
- Giving appreciated investments, such as stock shares. This allows donors to deduct the investments’ full market value (subject to certain limits) without having to pay capital gains tax on the appreciation.
- Contributing through Individual Retirement Accounts (IRAs). For donors who are age 70½ or older, direct contributions of up to $100,000 can be counted toward their required yearly IRA distributions and will not be included in their taxable income.
- Making larger charitable gifts! At a certain point, your total contributions to qualifying nonprofits may be high enough that itemizing makes sense for you again. Of course, that’s not for everyone–though some taxpayers may wish to alternate years, giving little or nothing for one year and making large gifts the next.
See a tax professional for more detailed planning and advice and get your end-of-year donations in place!