Could December 2020 be the most tax-effective time ever to give charity?

The big reason for giving charitable donations now is the U.S. CARES Act that was enacted in the Spring of 2020.

Jewish National Fund- USA supports young families moving to the Negev and Galilee.  (photo credit: JNF USA)
Jewish National Fund- USA supports young families moving to the Negev and Galilee.
(photo credit: JNF USA)

The calendar year of 2020 has been a challenging time to say the least. In a year when people have been anxious about their finances, giving charitable contributions has, understandably not been a priority for some. Yet, paradoxically, explains Matt Bernstein, Chief Planned Giving Officer at Jewish National Fund-USA (JNF-USA), due to unique circumstances, 2020 is actually the best year for making a tax-deductible charitable donation.  

Why is this the best time to make a tax-deductible donation?

We are coming to the end of the year, and all tax planning must be completed by December 31. The big reason for giving charitable donations is the U.S. CARES Act that was enacted in the Spring of 2020. Tucked into the act are two important benefits for charitable contributions:

First – anyone who does not itemize deductions on their tax return – meaning they only take the standard deductions – can take a $300 charitable deduction. So even if you are not itemizing, if you give $300 to your favorite charity, you can use that as a deduction.

What really got everyone’s attention is the fact that this year you can use 100% of a cash-only charitable contribution to your favorite charity, such as JNF-USA – and you can use 100% of the deduction against your adjusted gross income. For example, if your adjusted gross income is $100,000, you can make a charitable gift in cash and use the full amount of $100,000 against the adjusted income, which would effectively reduce your taxable income to zero. This is particularly important this year, because beginning January 1, 2021, the maximum amount that one can donate and deduct in any one year will be 60% of the adjusted gross income.  

What is the advantage of donating shares of stock as a charitable contribution?

This year, the stock market has reached record heights. If you want to make a contribution and have significant gains in your stocks, you can make the contribution not in cash but of stock. The reason being is if you were to sell the stock yourself, you would be subject to capital gains tax on the difference between the cost of the stock and the value of the stock when you sell it. If you donate the stock to JNF-USA, the capital gains tax disappears, and you receive a full deduction for the fair market value of the stock on the day we receive it. This year, in particular, giving away appreciated stock is a particularly smart choice.

What are Donor Advised Funds, and what makes them so useful?

A Donor Advised Fund is a charitable giving account. Instead of writing checks at the end of the year to different organizations, you write one check and deposit it in the Donor Advised Fund. You will receive the full tax deduction for doing so, and then you can make grants to charities at your discretion on your own schedule. JNF-USA is one of the few charities that runs its own Donor Advised Fund. We provide a choice of six professionally managed investment accounts. You get the tax deduction upfront, and you don’t have to make grants until you are ready to do so. Setting up a Donor Advised Fund is a smart thing to do, especially in December, because your charitable giving is now managed through your own account, and you are not obligated to make grants until you are ready. Yet, you will receive all of the tax benefits upfront. When you set up a Donor Advised Fund with JNF-USA, you’re not just an account number – you are a donor.

The Donor Advised Funds contains six professionally selected and managed portfolios from which you can choose. It’s conservative, smart, and you’re well taken care of. 

What are the benefits of a Charitable Gift Annuity? 

Because of the end-of-the-year deadline on tax deductions, our Charitable Gift Annuity program is very strong. Our Gift Annuity Program is one of the largest gift annuity programs in the country. When you establish a charitable gift annuity,  JNF-USA based upon your age,  will pay a lifetime income in which you will receive a tax deduction for a portion of the gift that you make, and depending on the type of contribution, whether stock or cash, a significant amount of your income will come back to you on an annual basis, tax-free. 

For example, a 72-year-old donating $10,000 to a Charitable Gift Annuity would yield 5.4% per year, or $540 annually. They would also be eligible to claim a charitable income tax deduction of $3,348.70 for 2020.  Of the $540 in annual income, about $458.46 would be received as tax-free income for a period of 14.5 years. After 1.45 years all of the income would be paid as taxable income. A Charitable Gift Annuity is an irrevocable gift to JNF-USA. When you pass away, whatever remains of the gift stays with JNF-USA for the work that we do in Israel.   

The JNF-USA Charitable Gift Annuity program oversees more than $75 million, is professionally managed and professionally serviced, with top-quality customer service. 

The above programs – Donor Advised Funds, gifts of appreciated securities, and Charitable Gift Annuities present ways to support one’s favorite charity and save substantially on one’s taxes.

Why donate to JNF-USA?

When you donate to JNF-USA, you are helping to build a bright, beautiful future for the people and land of Israel. JNF-USA is on the ground every day, focusing on economic development, infrastructure, connecting the next generation to Israel, ecology, heritage, and more. And this year, your tax-deductible donation can create substantial tax savings. 

For more information, contact Chief Planned Giving Officer, Matt Bernstein at [email protected] or +1.212.879.9305 ext.292.