Last minute CARES Act charitable steps

December 10, 2020

Even though there are only a few weeks left in the year, there are still some charitable actions you can take, especially with the temporary advantages created by the CARES Act. Some are straightforward and some complex so, as always, please consult with your advisors first.

Gifts of stock and timing – If you want to make a gift of appreciated stock to your favorite charity, please start that process now as it can take a week or more to settle. You can use appreciated stock to make a gift to our general operations, to an existing Fund here, or to start a new Fund such as Donor Advised, Designated, Field of Interest, or Scholarship. Stock transfer instructions, plus details of our different types of Funds, are on our website at cfgrundycounty.com.

The CARES Act of 2020 created temporary advantages for taxpayers to give to charity and this needs a bit of conversation about definitions. Donor Advised Funds are exempt from most tax legislation because it is looked upon as “double-dipping” – the donor gets the tax benefit while retaining control over the grantmaking. To prevent that, this year’s CARES Act tax advantages do NOT apply to Donor Advised Funds, whether here at the Community Foundation of Grundy County or at a commercial vendor, such as Schwab, Fidelity, or Vanguard.

However, a donor CAN use the CARES Act tax advantages to contribute to a different type of donor-designed Fund here, such as Designated, Scholarship, or Field of Interest. We have details of the differences between the Fund types on our website at cfgrundycounty.com. Also, the Foundation IS a 501c3, so charitable gifts via the CARES Act can come to us for our general operations and programs.

Gifts of Cash – The CARES Act incentivizes charitable giving by creating a $300 above-the-line deduction for qualified charitable contributions for taxpayers who do not itemize. For now, this is only for 2020. Also, please ask your tax advisor whether this $300 deduction is per person or per tax return. To date it appears to be per tax return, but it needs clarification.

Also, $300 doesn’t seem like much, but to some nonprofits who serve Grundy County, a new $300 donation can make a world of difference. Please consider it!

If you DO itemize, the CARES Act temporarily modifies the contribution limits for individuals and allows individuals to deduct qualified charitable contributions up to 100% of their AGI (up from 60%). The excess contributions will be carried forward for the next five years. These changes only apply to cash contributions, again excluding Donor Advised Funds, but other Fund types here at the Foundation are eligible. Stock donations and gifts to private foundations are still subject to the 30% of AGI rule.

Gifts from IRAs – The Charitable IRA Rollover is still in effect. This allows donors age 70-1/2 and older to make gifts to charity of up to $100,000 (per spouse) and not have that IRA withdrawal count toward taxable income. Please contact your IRA administrator to start the process as the check must be cut to the charity from the administrator.

The CARES Act also suspends early IRA withdrawal penalties, so it might be advantageous for donors between 59-1/2 and 70-1/2 to use this for charitable donations. Please ask your IRA administrator and tax preparer first.

Lastly, did you have a high income year? I know that sounds strange to say among pandemic job loss and business closings, but it is still possible for someone to have a high income year in 2020. If so, and you want to offset your tax obligations, please consider a donor-designed Fund here at the Community Foundation.

The great thing about setting up new Donor Advised Funds in a hurry at the end of the tax year is that you receive the instant tax benefit to beat the deadline but are able to make grants from the Fund at your leisure.

If you’re not sure whether to give your favorite charity a large year-end gift, placing that asset in a Donor Advised Fund here relieves that last-minute stress. If you or your advisor have questions about how Funds at the Foundation work, please call us at 815-941-0852, email us at [email protected], or review the details at https://cfgrundycounty.com.

Give where you can, where you are, with what you have.

To everyone, Merry Christmas and here’s to a much better 2021!

— Julianne Buck is Executive Director of the Community Foundation of Grundy County

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