The CARES Act Encourages Giving in 2020
As you may have read, recent legislation has created some opportunities for taxpayers to be strategic, and more generous, with their charitable giving for 2020. For donors and nonprofits, there are three key items for you to know related to the charitable giving deduction and the increase in itemized deductions.
For those taking the standard deduction in 2020:
1. $300 Charitable Giving Deduction:Individuals can deduct up to $300 for charitable giving in 2020 ($600 for a married couple) in addition to the standard deduction. In prior years, if you took the standard deduction, you couldn’t take any charitable deduction.
For those who itemize their deductions:
2. An individual can deduct donations up to 100% of their 2020 adjusted gross income for cash gifts to charity. Keep in mind that this does not include gifts of appreciated securities.
3. Act now! As of right now, these deductions are only available in 2020.
For Nonprofits
Below is some additional guidance for you from our experts Margo Cook and Barb Kappel:
- $300 Charitable Giving Deduction: This is a nice opportunity for annual givers to stretch their giving to you this year.
- WHO should you promote this to? Annual givers, planned giving donors, special giving donors, event attendees, and friends of your organization.
- HOW should you promote this? A general appeal/message sent by email is certainly appropriate to this group of people. You could say something like: “Did you know that this year you can give $300 to our organization and still get a deduction on your taxes even if you don’t itemize? We would be grateful if you would consider us in your year-end giving plans.”
- Increase in Itemized Deductions: This is a targeted opportunity likely for a very small group of your donors.
- WHO should you promote this to? This should only be sent to those donors that you would hand-pick out of your constituency – those donors who are simply working for fun, during retirement or otherwise, or who do not need any of the income they earn in a calendar year. Since we know you know your donors well, it should be easy for you to find this smaller group of targeted message recipients.
- HOW should you promote this? Here are five suggested steps for promoting the increase in itemized deductions:
STEP ONE: Identify a list of top donors
Select a list of those who could potentially benefit from this new CARES ACT giving benefit. Focus on lapsed donors or those your organization is expecting to give by year end.
STEP TWO: One-on-one contact
At this point email is likely your best bet! Craft a clear, yet enticing messaging to those larger donors who have not yet made a year-end gift.
“Dear Donor: You are among our most generous donors, and we are so grateful for your support. This year, there has been an important change in legislation that may be of interest to you. Did you know that you can deduct up to 100% of your 2020 adjusted gross income to charity this year? While we realize that there are very few people who would be able to do such a thing, we hope you will spread the word for us. We would be honored if someone was able to increase their giving to us this year thanks to this new tax rule. Would you be willing to have a brief call (10-15 min) to discuss this with us?”
STEP THREE: Offer to a brief call
Incorporate language in your initial outreach that offers a brief call (no longer than 10-15 minutes to discuss the basics of the benefits this year). This allows the gift officer to explain scenarios based on that individuals typical (or requested/proposed) giving this year. ***Bonus here is the one-on-one cultivation opportunity.
Example: Let’s say you have a donor who is semi-retired and usually makes a cash gift of $10,000 every December. If they are willing to share some information with you about their AGI, you could explain that even if they only make $20,000 for this year, this is the only year than can give that entire amount away to charity and receive a deduction.
Note: If your giving officer is uncomfortable with the technical nature of this conversation, wrap in a trusted financial or tax professional if the donor is comfortable with hearing it from an expert.
STEP FOUR: Donor verifies with accountant
If needed, this brief call can ensure the benefits align with their deductions for 2020.
STEP FIVE: Donor makes a gift!
A win-win for all!