By Gina M. Barry
Bacon Wilson P.C.
As the COVID-19 pandemic continues, many are suffering, including the charitable entities that would normally rush to assist those who are in need. With nearly all in-person events being cancelled, charities have found themselves unable to connect with their donors in the usual ways, and they have been working hard to create meaningful alternatives. Further, donors who would normally be generous in their donations to charitable entities have found themselves favoring scarcity and cutting their budgets to provide for only essential needs, which does not include charitable giving. Despite these challenges, charitable giving continues to be encouraged as it provides myriad of benefits, both to the donor and the recipient.
Choose your cause
In order to reap the most benefit from charitable giving, you must first choose an appropriate charity to benefit from your generosity. There are thousands of charities working within a huge variety of causes from which to choose. Perhaps preventing abuse of children or animals is a cause near and dear to your heart, or maybe your concerns center more on saving the environment, or bringing awareness and funding research with respect to major illnesses that affect our population. Whatever the cause, you can be certain that there is a charity working to bring positive change in that area. Of course, the causes touched upon here are just a few examples of where your donation can make a difference.
Decide how you’ll contribute
Once you have decided that you would like to support a charitable cause, it is important to determine how you will contribute. Most will choose to donate cash; however, you might also consider donating highly appreciated securities, which would allow you to avoid paying the capital gains tax on those assets. Likewise, the charity also would avoid paying this tax due to its charitable status.
Aside from a monetary donation, you may also donate goods. The pandemic has seen many households purging gently used, but unwanted, items. For example, you may have a pantry full of uneaten, non-perishable food that your family is not eating. Consider filling a couple of grocery bags with this food and donating to your local food pantry. Likewise, children often grow out of clothes and get bored with their toys while they are still in good repair. Many charities that benefit children would be delighted to receive these clothes and toys to help the children that they serve. Similarly, when you and your old vehicle finally part ways, you do not have to send the vehicle to a junk yard. Many charities accept any vehicle, working or not, as a donation.
If making a monetary contribution or a donation of goods is not possible at this time, consider volunteering your time to your favorite cause. Elder services, animal shelters, hospitals, and soup kitchens are all wonderful places to volunteer. While the time you volunteer is not tax-deductible, any out-of-pocket expenses associated with volunteering are usually deductible. For example, travel expenses to and from the volunteer site, as well as parking fees and tolls may be deducted.
Don’t forget to do your homework
When you have decided which cause you would like to help and in what manner, you are almost ready to make a donation. Be certain that the charity has received approval from the Internal Revenue Service (“IRS”) as being eligible to receive tax deductible contributions. You can determine the tax exempt status of an organization either by contacting your local IRS office, or by asking the organization for a copy of its “Letter of Determination,” which is the formal notification the organization receives from the IRS once its tax exempt status has been approved. Also, IRS Publication 78, Cumulative List of Organizations, is an annual listing of thousands of organizations that can accept tax deductible donations.
Donations claimed as tax-deductible contributions for 2020 must be actually paid to the charity on or before December 31, 2020, and it is best always to obtain a receipt for your donation regardless of the amount. Further, in order to claim a charitable deduction on your income taxes, you must itemize on your federal tax return. When you give to organizations that are public charities, you may deduct contributions representing up to 50 percent of your adjusted gross income. Individuals giving to organizations that are private foundations may generally deduct contributions representing up to 30 percent of their adjusted gross income. These deductions can result in significant savings on your income taxes.
Charitable giving is extremely rewarding, especially in times of scarcity, as it can shift your mindset back to abundance. You will not only reap the benefit of knowing that you are helping to make a difference in this world, but when tax season comes you may enjoy a beneficial tax deduction as well.
Gina M. Barry is a Partner with the law firm of Bacon Wilson, P.C., Attorneys at Law. She is a member of the National Association of Elder Law Attorneys, the Estate Planning Council, and the Western Massachusetts Elder Care Professionals Association. She concentrates her practice in the areas of estate and asset protection planning, probate administration and litigation, guardianships, conservatorships and residential real estate. Gina may be reached at 413-781-0560 or gbarry@baconwilson.com.
