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Charitable Gifting During the Pandemic, Tips to Use & Tricks to Avoid

May 14, 2020

Filed under: Estate Planning — Raymund Rasco @ 2:10 pm

No one could have foreseen or wished for this Pandemic, or the impact that it has had on our planet. Yet one of the silver linings of all the current events has been the compassion and willingness that humanity has exhibited in helping one another. The amount of kindness, charitable gifting & volunteer work has been tremendous, and it is quite different than it was prior to the Pandemic.

Specifically, under the CARES act passed earlier this year, there are several changes to the way gifting is done to charitable organizations.

To start, there is now a $300 deduction available for Charitable Gifts to qualified organizations, even if you’re not itemizing your tax deductions. That is a change from the current law. It’s not clear whether this will continue beyond 2020, but it has certainly made it easier to obtain a tax benefit as a result of the gift.

Also, there is a suspension for tax year 2020 of the rule that requires you to limit your charitable deduction to 60% of your adjusted gross income – no matter how much you’ve gifted. There seems to be no limit in 2020.

Gifting for Retirees has taken on a different angle as well.  Because of the suspension of the rule that requires retirees to take Required Minimum Distributions from their Qualified retirement accounts, retirees might be less incentivized to utilize the Qualified Charitable Deduction tool which allows them to gift directly to a charity from retirement accounts such as and IRA and 401k (thereby reducing potential tax liability.)  Although that rule is still an acceptable method of gifting, and should still be considered when gifting above the $300 amount.

Unfortunately situations like this also bring out the worst in some people. That also means that scammers and those with less altruistic intentions can take advantage of generosity. Two tools which can be used to investigate whether or not a charity is in fact a legitimate charity and determine whether or not is properly formed for tax purposes are (a) the IRS website and (b) the Charity Navigator website. Specifically under the IRS website you can do a search to see whether it is a tax exempt organization.

It’s important to set the expectation at the onset whether or not you are expecting to receive a tax benefit as a result of your charitable gift. It’s not always the case that the donor is seeking tax benefits.  However, if a tax benefit (deduction) is sought, best to confirm that it is a 501 (c) (3) organization & obtain proper documentation of the gift.

Checking on some smaller charities & grassroots organizations/movements is much more difficult – it’s important to know how you came across the charity – a personal connection? Social media? Or did they solicit you from out of the blue.  Don’t be afraid to ask probing questions of the organizers.

Gofundme.com  pages have had a tremendous impact on helping with causes, although they’re usually not for tax-exempt charities. You should know that there is minimal supervision & policing of what exactly is done with the money after it’s been collected. Again, here a personal connection to the cause and to the persons in charge of the cause is helpful to determine legitimacy.

Neel and Pink recently hosted a Webinar on Facebook and on Youtube with such grassroots organizations, you can find the replay here: https://m.facebook.com/story.php?story_fbid=10221506184629053&id=13845705

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