By: Rob Cook
Are you selling a business this year but are dreading the tax bill that is bound to come? Perhaps you are planning to sell some property with a large built in gain but are hesitant to do it because “the tax man cometh”? Or maybe you would love to finally do that Roth conversion you’ve been thinking about, now that the market has dropped meaningfully from its March highs but are worried you won’t have the cash to pay the taxes?
If any of these or similar situations apply to you, you might be in a great position to take advantage of a slight change the CARES Act made to the charitable contribution rules for 2020. For this year only, the IRS is allowing taxpayers an unlimited charitable contribution deduction of certain contributions. In normal years your charitable contribution deduction is generally limited to 60% of your adjusted gross income (AGI), but can be limited to 50%, 30%, or 20% of your AGI, depending on the type of property you give and the type of organization you give it to. However, this year, in an effort to incentivize individuals to donate to local organizations, the 60% limitation is being lifted to 100% and many of the lower limitation amounts have been increased as well.
Now, not everyone has the ability or desire to donate more than 60% of their income to a charitable cause, but if you do fall into that category, this small change could save you a significant amount on your tax return this year.
If you're curious about charitable contributions and the changes in 2020, get in touch with a financial advisor at (916) 924-7527 or complete our contact form.