12-09-2020


You can give back to United Way and take tax-smart actions. Here are 6 to consider for your personal financial situation.
1. Deduct $300 without itemizing

This year only! You can deduct $300 of charitable gifts without itemizing. The $300 limit is one per tax filing unit. (So, married couples filing jointly don’t get $600.) This must be a cash gift paid to an operating nonprofit and not to a donor advised fund.

2. Deduct up to 100% of your income

This year only! You can deduct up to 100% of your adjusted gross income using charitable gifts of cash. These gifts must go to an operating nonprofit and not to a donor advised fund.

3. Make IRA gifts @ age 70½ + 

IRA accounts have no required minimum distribution (RMD) in 2020. But those age 70½ or older can still make gifts directly from an IRA to a nonprofit up to $100,000. This gift donates pre-tax dollars. The earned income is never taxed because it goes directly to the nonprofit.

4.  IRA gifts @ age 5½  – 70½ 

IRA withdrawals during this age create no penalties. But they are taxable. However, this year cash gifts can be deducted up to 100% of income. If you are already itemizing deductions this can help offset the tax impact from an IRA withdrawal.

5. IRA beneficiary v. gift in a will

Many people like to include a charitable gift in their will to support a cause that has been important in their lives. One tax smart strategy is to leave part of an IRA, 401(k), or 403(b) account to a nonprofit. It’s easy to change account beneficiaries by contacting the financial institution.

Why is this smart? Because heirs pay income taxes on this money. Starting this year, heirs (except spouses) must take out all funds (and pay taxes) within 10 years of inheriting. But any part left to a nonprofit avoids these taxes. So, if you plan to include a nonprofit in your will, use these accounts first.

6. Bunch gifts with a donor advised fund 

Many people like to include a charitable gift in their will to support a cause that has been important in their lives. One tax smart strategy is to leave part of an IRA, 401(k), or 403(b) account to a nonprofit. It’s easy to change account beneficiaries by contacting the financial institution.

The 2018 tax law created much higher standard deductions. Fewer people can use charitable deductions because they aren’t itemizing. One way around that is to “bunch” charitable gifts.

Example: A donor puts 5 years’ worth of donations into a donor advised fund. The donor takes a tax deduction for the entire amount in that year. Because the deduction is so large, the donor itemizes in that year. In later years, the donor makes gifts to charities from the fund. This creates no tax deduction. But in those years the donor takes the standard deduction instead of itemizing.

Remember: We recommend that you consult your accountant and/or financial advisor before taking any action on the methods listed here. Your individual financial situation will determine the best course of action for you.

To learn more about how your gifts can make a lasting impact at United Way of Greater Atlanta, contact: Eve Powell at epowell@unitedwaygreateratlanta.org.