Year-End Giving: A Bright Side in a Dark Year
“But who am I and who are my people that we should be able to offer as generously as this? For all things come from You, and from Your hand we have given to You.” 1 Chronicles 29:14
David was awestruck. As he reflected on the glory and power of God, as he contemplated the truth, realizing that all riches come only from Him, he bowed in humble gratitude before his kind and gracious Lord. How insignificant he was, and yet how blessed. And to be granted the opportunity to give back to God what God had already given to him, David rejoiced in the high and holy privilege.
It is good for a Christian to come to recognize and reflect, as David did, on the extravagant grace of God. We who have tasted the kindness of the Lord in salvation are the most grateful and awestruck of all people. Like David we also marvel at Gods kindness in provision and wonder that we should be able to offer “as generously as this.”
As the Lord’s cherished people, we count the trials of 2020 to be blessing and gain. We are grateful God has kept us steadfast in His righteousness. While we may have felt the turbulence and surface chop of unfamiliar COVID-19/lockdown waters, we realize that our Lord’s hand was ever steady on the wheel. While we may have been uncertain at times, and sometimes anxious, God’s unchanging Word was our confident guide. Just as Hopeful encouraged Christian in Doubting Castle (Pilgrim’s Progress), we too can be confident that this will yet work out for our good.
We’ve discovered a surprising, little-known opportunity for charitable giving, which Congress created partly in response to the pandemic and its related financial impact. It affords many a great opportunity to exercise financial stewardship in a way that can help further the work of the gospel around the world. Christians considering year-end giving to 501(c)(3) charitable organizations—e.g., your local church, Founders Ministries—have a unique, tax advantage for 2020.
You may have heard of the CARES Act (Coronavirus Aid, Relief, and Economic Security). It is intended to ease tax burdens but there is a provision in the Act that allows taxpayers to make charitable contributions “Above the Line,” where it generally has the most benefit to reduce your tax obligation.
Typically, charitable contributions have counted as deductions only for those who itemize their taxes, for those who do not choose to take the simpler standard deduction. According to Chad Chubb, reporting for The Kiplinger Letter (August 23, 2020), “Taxpayers can take this universal deduction no matter whether they itemize or take the standard deduction on their taxes.” This is an unexpected opportunity for Christians to give additional charitable gifts and realize tax benefit whether they itemize their taxes or not.
For taxpayers who do not itemize, but opt for the standard deduction, they may deduct $300 for contributions to qualified 501(c)(3) charities (and only $300 for those filing jointly). “Because the CARES Act deduction is a universal above-the-line deduction,” explains Chubb, “you can list your contribution as an adjustment to income on your taxes. In short, with the CARES Act, if you donate up to $300 in cash to a qualified organization, your adjusted gross income will be reduced up to $300.”
For taxpayers who itemize, the CARES Act boosted the deduction for charitable giving from 60% to 100% of Adjusted Gross Income (AGI) in 2020. If “your AGI is $250,000, you can deduct $250,000 in charitable contributions,” Chubb says, adding that while “the ultimate goal of the universal deduction is to help smaller organizations, this extension for deductions could be an additional incentive for wealthy donors to continue giving this year.” The CARES Act also boosted corporate giving, from 10% of taxable income to 25%, with donations in excess of that allowed to be carried forward for five years.
Another opportunity comes through the SECURE Act (Setting Every Community up for Retirement Enhancement), with its modified rules for required minimum distributions (RMDs) for 2020. As of January 1, 2020, the SECURE Act had already bumped the starting age for RMDs to 72 from 70½, but when Congress passed the CARES Act, it completely waived RMDs for the 2020 calendar year. Roger Young, in The Kiplinger Letter (June 29, 2020), reported, “You don’t need to take [a required minimum distribution], … and if you already have, you can probably undo it.”
So, do qualified charitable distributions (QCDs) make sense in a year without required minimum distributions (RMDs)?
People who are 70½ years or older can distribute up to $100,000 directly from a traditional IRA to a qualified charity each year. QCDs can count toward your RMD, which means they will not be included in your taxable income, but in this year they cannot be counted as itemized deductions.
Ordinarily, that is a nice strategy for charitably minded people, especially for those who don’t normally itemize deductions. But in 2020, with RMDs waived, you could still execute a QCD, and your taxable income wouldn’t be any lower than if you had opted not to take a distribution. (A QCD this year would, however, reduce your account balance, and therefore it would reduce future RMDs for you and your beneficiaries.)
If thinking through the tax ramifications of charitable giving makes your eyes glaze over, be of good cheer. Here’s the bottom line: This year, virtually every type of taxpayer, individual and corporate, can benefit from tax code changes by increasing their giving to faithful ministries.
Pandemics will come and go, tax codes will change, but Jesus Christ is the same yesterday and today and forever. He remains on the throne and His people will glorify Him and enjoy Him forever.
As watchful servants, looking unto Jesus, our joyful labors will continue until He returns. We trust the promise of Christ to build His church, knowing the gates of Hell will not prevail against it. In the surety of His promise, we are grateful for you and your kindness in supporting faithful local churches, Founders Ministries, and other likeminded ministries of sound truth, clarity of conviction, and moral courage in these troubled times.
Please note: This article does not represent tax advice. It is simply calling attention to an opportunity that faithful financial stewards should investigate. Seek tax advice from a reputable CPA or qualified financial advisor.