A Window of Opportunity
By: Tim Sutherland, Harvest Rock Advisors
2020 has certainly presented its share of stiff challenges for the York County History Center, our valued members and advocates. Who could have imagined an infectious virus forcing the closure of our museums for months on end?
The COVID pandemic has been likened to a war event. Last March, historic new federal legislation – the CARES Act – was passed to finance the fiscal “war” effort, conferring money and new tax law weaponry to help assuage the national financial crisis.
One of the new tax weapons allows for a one-hundred percent (100%) charitable tax deduction for cash gifts made to a not-for-profit organization – for tax year 2020 only. In the past, cash charitable gifts could only reduce your taxable income by 50-to-60% in one tax year.
The special 2020 charitable income tax deduction is designed to encourage more charitable giving to not-for-profit organizations to help them repair the economic damage from the COVID crisis. It could also create a unique tax planning opportunity for those individuals who no longer can itemize their tax deductions on their federal income tax return.
For example, if you no longer itemize deductions and instead use the standard deduction, you do not receive any income tax benefits for otherwise eligible medical expenses, other tax payments, mortgage interest payments and your total charitable gifts.
However, the extra tax deduction granted for charitable cash gifts in 2020 could possibly push your total itemizable deductions higher than the standard deduction and thus enable you to itemize deductions again for 2020, creating a nice new tax break come next April.
Even if you do not itemize your tax deductions for 2020, another CARES Act provision allows taxpayers who use the standard deduction to still deduct up to $300 for cash gifts made to YCHC in 2020.
Like in past years, you can make gifts of appreciated investments directly to YCHC and fully avoid taxable capital gains plus realize a charitable income tax deduction of up to 30% of your taxable income.
Another major CARES Act change is that required minimum distributions from retirement accounts are suspended for 2020. While many folks will appreciate this temporary relief, IRA account assets are a wonderful source of charitable giving. Each year, you can direct up to $100,000 of IRA assets to be sent directly to YCHC without any income tax consequence whatsoever.
Some of these favorable charitable income tax breaks expire on the first day of 2021, so don’t let them slip away unused. There’s ample time left this month you to make a charitable gift to YCHC and capture some extra tax benefits.
As always, check first with your tax advisor before making any financial moves that have income tax consequences.
Feel free to call the Advancement team at YCHC with any questions or to gather more information about the various way in which you can financially advantage our organization during these challenging times complete with special tax benefits.