"Even if they’re not worried about tax changes in 2021, rich Americans are still pursuing the usual end-of-year planning moves designed to lower their tax bills. The pandemic and Covid-19-related legislation like the CARES Act offer the chance to make these strategies more lucrative.For example, the charitably inclined have the unprecedented ability to offset 100% of their taxable income with donations in 2020. To take full advantage, donors need to make much of their gifts in cash -- a sticking point for those who prefer the bigger tax breaks provided by gifts of appreciated stock."
Am I reading this right? I can deduct charitable contributions dollar-for-dollar from my taxes rather than subtracting from my taxable income?? So a couple thousand $ donated to Doctors Without Borders or Post Polio Health International or PBS etc would be subtracted from the taxes due to Uncle Sam?? Or is it still just subtracted from income and I would then pay 20% less tax??
I don't use a tax man, and there apparently are some new rules, and this needs to be clarified in the next week, so any knowledgeable advice from a reader would be appreciated.
Update: Definitive answer from Kyle in the Comments section below. Sadly, it's not what I was hoping to hear.
A test comment and plea to update if you hear more on this.
ReplyDeleteI absolutely will, but I don't know where to look for (presumably) unpublished new tax regulations which the Congressmen can use to their advantage but us normal people won't find out about until the new year, when it's too late for us to take advantage of new changes.
DeleteBut this blog has a diverse and sophisticated readership, and I'm hoping someone will have insight into this matter. We'll see. Stay tuned.
The charitable giving still works as an itemized deduction, meaning it reduces the giver's income, not their tax bill. The change in the CARES Act just increases the cap for the deduction from 60% of income to 100%. So, the last of your questions is correct.
ReplyDeleteThis change would obviously only be available to those who itemize and can give massive amounts to charity, the very wealthy. But don't feel too put-upon, because they also added a $300 "above the line" charitable giving deduction, which is easily accessible to everyone.
Also noteworthy: "applies only to gifts of cash directly to charities (not including family-funded private foundations)." You can't use this to help dump your inflated-value stock before the bubble bursts, and you can't give it to the Rump Foundation.
https://www.forbes.com/sites/berniekent/2020/04/12/cares-act-100-of-agi-limit-on-charitable-contributions-explained/?sh=20b8565b58da
https://www.bkd.com/alert-article/2020/11/2020-year-end-charitable-giving-guide