ALPENA – The CARES Act passed by Congress in March 2020 has made some significant changes affecting charitable giving this year.
Those changes include a new charitable deduction available to individual taxpayers that do not itemize their deductions, which allows for a charitable deduction of up to $300 per individual; and the CARES Act waives the requirement for many IRA holders to take a minimum distribution by the end of the year.
“Giving through an Individual Retirement Account, or IRA, has become an increasingly popular way to make a gift, and it can be done tax free,” says Patrick Heraghty, Community Foundation for Northeast Michigan (CFNEM) Executive Director. “Even though the minimum distribution requirement has been waived, this method of giving is still incredibly effective and important. Owners with these types of accounts are often able to give significant donations that benefit both the community, as well as their own tax needs.”
Heraghty says that in a year with increased demand on the services nonprofits provide, and in these times of uncertainty, charitable giving can make a huge difference close to home.
“Just recently we received a large donation of stocks and IRA distributions that will help a huge community center and library project finally move forward,” said Heraghty. “These types of gifts remain a unique and beneficial mode of giving, and one that has been increasing in popularity over the last few years.”
For those eligible, donating IRA funds to charity through a Qualified Charitable Distribution (QCD) may yield the biggest tax bang for your charitable buck.
There are a few simple requirements for an IRA distribution gift: The check must not pass through the donor’s hands; it must be written by the custodian of the IRA directly to the charity, which must be a qualifying charity other than a donor advised fund or a private foundation; and you will need an acknowledgement from the charity for the gift.
While a donation from an IRA can be made at any time to a charitable organization, the Community Foundation staff points out that Giving Tuesday, on December 1, 2020, may be the perfect time for giving such a gift.
“Our local Giving Tuesday Northeast Michigan event is coming up quick,” says CFNEM’s Marketing Communications Director Christine Hitch. “We have 48 nonprofit organizations throughout our nine-county service area participating in our event this year, and we want to make sure people know they can use an IRA distribution to be counted toward Giving Tuesday in support of any of these organizations.”
Hitch says that for an IRA distribution donation to be counted for Giving Tuesday Northeast Michigan, it needs to be received by the Community Foundation between November 24 and December 1. She also points out that while Giving Tuesday is a big day of giving, IRA gifts can be made at any time to any of the Community Foundation’s 500+ charitable funds, or to any qualifying charitable organization near to their heart.
Those looking to make charitable donations through an IRA distribution should contact their tax professional, as the benefits could be substantial.