November 25, 2020Share:
By: Sallie Byrd
With Giving Tuesday less than a week away, it’s important to know the ways you can give back and enjoy potential tax savings. Here are three ways to make the most of your charitable contributions this year:
Make a contribution directly from certain IRAs
Under the CARES Act, Required Minimum Distributions (RMD) are waived for 2020. However, if you do choose to take an RMD, you can still reduce your taxable income up to $100,000 by making a Qualified Charitable Distribution (QCD). The distribution must be made directly to the charity from the IRA in order to qualify as a QCD. Depending on your personal tax situation, even though your RMD is not required, it may still be beneficial to take an RMD if used to make charitable contributions.
Contribute to an Alabama Scholarship Granting Organization (SGO)
The Alabama Accountability Act created a tax credit scholarship program allowing low-income families to use donations made to a scholarship granting organization, or SGO, to pay tuition for their children to attend a private school or an out-of-district public school. Contributions to an SGO are treated as a nonrefundable credit on your Alabama income tax return, with unused credits carried forward for up to three years. New clarification on the treatment for Federal tax purposes limits the charitable deduction you are allowed. Please contact your tax advisor if you would like to consider contributing to an SGO.
Donate appreciated stock
Instead of selling an appreciated stock held long-term and contributing the proceeds, you can donate the stock directly to charity. This will eliminate capital gains tax on the appreciation of the stock, and you will qualify for a charitable deduction for the fair market value on the date of the contribution.
Taxpayers who do not itemize
The CARES Act allows taxpayers who do not itemize to take a charitable deduction in 2020 for up to $300 of cash contributions made to qualifying organizations. Charitable deductions have previously been limited to taxpayers who itemize their deductions.
If you have questions about these options, please give us a call at 251-410-6700.