100% Deductibility of Cash Charitable Contributions in 2020
Amy and I just finished allocating our 2020 year-end charitable contributions from our Anchor Point Foundation. Given our charitable contributions around Covid and Racial Equity throughout the year, we were extremely overallocated going into our end-of-year gift cycle.
This morning I got a note from a Jenny Thompson who said:
I’m writing today because I only just learned that cash donations are 100% deductible this year as part of CARES.
I’m front loading my monthly donations for 2021 as much as possible and suggesting friends that can do the same. The charity gets more cash on hand and we get a 100% deduction. What a win-win…
We hadn’t really processed clearly the changes to the deductibility of charitable contributions in 2020 based on the CARES Act. While we were aware of the change that allows cash charitable contributions to be deductible up to 100% of adjusted gross income (AGI), we hadn’t worked through the numbers for our situation.
When we did, we realized that we were at our limit of deductibility for gifts to our Foundation and our Donor Advised Fund (where most of our charitable giving flows through). Still, we had plenty of headroom on any cash we wanted to give charitably.
While this is not the most tax-efficient approach to charitable giving, we decided to pull forward into 2020 some additional gifts, given that the organizations really need the money right now. When one actually does the spreadsheet math, given the tax dynamics, it’s pretty efficient, especially if tax optimization is not your primary motivation.
So, if you are considering making charitable donations in cash before the end of the year, or even in 2021, and you have the resources, consider pulling the gifts forward into 2020 so that the organizations and their constituents get the benefit of the gift right now.
Of course, before you do anything, check with your tax accountant to make sure this applies to your situation. None of the above is tax or legal advice from me.