2020 Tax Tips
Three Critical Tax Tips for 2020:
1 – DEDUCT UP TO $300 IN CHARITABLE CASH GIFTS EVEN IF YOU DON’T ITEMIZE
If you do not itemize deductions, the CARES Act permits you to claim an additional $300 ABOVE your standard federal deduction for cash gifts to charities in 2020. If you DO itemize your deductions, the CARES Act raises the Adjusted Gross Income ceiling for gifts to public charities from 60% to 100% for 2020 for federal income tax purposes.
2 – MAKE GIFTS OF APPRECIATED STOCK
With the stock market gains in 2019 and 2020, you may be fortunate enough to have enjoyed significant increases in your stock or mutual fund holdings. If you’ve held the stock for more than a year and you sell the stock, those great gains will be taxed (both federal and state) as capital gain income, at roughly 20% for most individuals if you live in Connecticut. BUT – you can make the gains work to your advantage. Call the charity, tell them you want to make a gift of stock and enjoy a DOUBLE WIN! You pay NO tax on the transaction, AND you may deduct full market value of the stock on your tax return if you itemize your deductions. You get a tax break, and your favorite non-profit benefits. For information on how to make a gift of stock please email Deb Shulansky at Deb@clcct.org
3 – MAXIMIZE THE MANDATORY IRA DISTRIBUTION
If you are 72 (or reached the age of 70 ½ before Jan. 1, 2020) you are required to take a taxable distribution (RMD or required minimum distribution) from your IRA. For 2020, the CARES Act gives you the right to waive that distribution. But the IRS announced that while the RMD is not required, you retain the right to request that distribution. For those who want a tax advantage from their charitable gifts, this is a GREAT strategy. How? Simple! Before the end of 2020, instruct your IRA advisor to make the required distribution directly to a nonprofit of your choice, and the entire amount of that distribution will NOT be subject to ANY income tax. This is an opportunity to eliminate tax obligations on the RMD. The entirety of the RMD can be directed to a single gift or broken into multiple gifts, and all tax consequences on the RMD that was designated as charitable gifts (Qualified Charitable Distributions or QCD’s) are eliminated.
EXTRA BONUS: Do you (or did you) work for an employer that has a matching gift program? You just might double your gift!
QUESTIONS? Just call Deb Shulansky, Director of Development, at 860-232-9993 or email her at