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Tax Tip: The CARES Act and Charitable Deductions

November 12, 2020

By Michael Elias, head of major gifts and planned giving, United Way of Northeast Florida

 

The pandemic has devastated our economy, our physical health and our mental well-being. Three times as many Americans have died due to COVID-19 as died in the Vietnam War, and our GDP declined over three times as much as our worst quarterly record since tabulation of records began in 1947.

But most of all, the COVID- 19 pandemic served a crushing financial blow to the 40 percent in our community who struggled to make ends meet before the pandemic. Low-income Americans, primarily working single mothers, are most likely to experience loss of wages, food insecurity, eviction or foreclosure, increased depression and inability to pay their monthly bills, such as utilities and child care. Moreover, this pandemic has been especially cruel for those marginalized by racial inequities. African-Americans are 2.6 times more likely to contract COVID-19 and 4.7 times more likely to be hospitalized.

The devastating effects of COVID-19 on our economy (Source: The Brookings Institution)

 

Under the CARES Act 2020, every American has additional incentives – through tax savings – to help United Way of Northeast Florida serve those most impacted by this pandemic. Because of the huge strain on nonprofits due to serving higher needs during the pandemic, Congress has acknowledged nonprofits – including United Way – are essential services. What does this mean for you? Anyone can now take a deduction off their taxable income for charitable contributions $300 or less (household).

If you have never supported United Way, this would be a great opportunity for you to do so. When making a $300 gift to United Way, you will qualify for a charitable deduction even if you take the standard deduction. If you are already supporting our work, consider making an additional gift of $300 in 2020.

Your gift of at least $300 to United Way can provide food for a hungry family, months of paid utility bills, rent or mortgage assistance, or access to mental-health counseling services. Moreover, you will be able to deduct that amount from your taxable income for tax year 2020. To not make a donation, the taxpayer leaves money on the table.

Most Americans will not itemize due to the doubling of deductions with the passing of the Tax Cuts and Jobs Act. Those in the highest earnings brackets might have an opportunity to itemize their charitable gifts up to 100 percent of their adjusted gross income. In addition, those who are over 70.5 do not have to take their required distribution this year, but they might still have tax advantages available. Donors who are 70.5 might donate up to $100,000 from their IRA – and you will not pay income tax on the gift amount.

As you begin to finalize your giving decisions for tax year 2020, we’ve compiled some helpful links to help you navigate this “new normal” for charitable giving and tax deductions:

 

In addition, United Way provides donors no-cost consultations to help you make the most of your charitable desires and tax-savings potential. Please reach out to me, Michael Elias, United Way’s head of major gifts and planned giving, any time. I’d be more than happy to assist you. We also welcome you to visit and explore our new planned giving web resource.

As we continue to navigate this unpreceded year in our lives, it’s important to remember the good that’s come out of the heartache. Help us help more families struggling in these difficult times by taking advantage of these tax law changes and making a tax-deductible contribution today — a win for you and a win for our community. Thank you for caring.