Christmas is why we give. God so loved you he gave his one and only son (Jn. 3:16). But there is nothing wrong with being a good steward and taking advantage of some year-end tax opportunities.
New Tax Deductions for People Who Don’t Itemize
The CARES Act passed earlier this year provides a one-time above the line credit of $300 per individual, $600 per couple for cash donations to 501(c)(3) charities. This means you reduce your taxable income by this amount providing a double benefit. You benefit a not for profit helping those who need it most in this pandemic, and you benefit yourself from a reduction in tax liability. Better still most not for profits have donors matching your year-end giving, like Administer Justice. That doubles your impact again.
Up to 100% Limit on Eligible Cash Contributions Made by Itemizers in 2020.
Normally there is a cap on the percentage of one’s income which can be deducted in a single year. This cap ranges from 20% to 60%. For 2020 the cap is removed. This is the perfect year to surprise a not for profit with a major gift. They have been hit hard, the people they serve have increased needs, and you can have significant impact.
You need to make a direct gift to a charitable organization. Unfortunately, gifts to donor advised funds do not qualify for this exception. Regardless, if you own stocks and believe in supporting private charitable work, then a donor advised fund (DAF) is a wise tax investment vehicle. These funds avoid capital gains while maximizing your deduction in the year you fund the DAF. I recommend speaking with the National Christian Foundation.
Corporate Limit Increased to 25% of Taxable Income & PPP Funds are Deductible Business Expenses!
The CARES Act permits a C Corporation to apply an increased limit of 25% of taxable income for charitable contributions made in 2020.
Many businesses do not operate as C Corporations. The new COVID Relief Bill approved by both houses and awaiting action by the President allows you to deduct expenses for which you received PPP funding. This will be a significant tax benefit. While the Act is not yet law, it is likely the Bill will be passed, and this provision has broad bi-partisan support. The IRS specifically said this was not permitted earlier in the year, but Congress is overriding the IRS.
Consider using a portion of this windfall to surprise a not for profit with a year-end donation. Donations given to Administer Justice are doubled through December 31 and our clients facing abuse, eviction, debt, health issues, fear, and hopelessness will be blessed by your support!
COVID Relief Bill Provides Tax Stimulus of $600 to Each Individual
President Trump postponed signing this Bill until Sunday night, but the bill is now law. That is good news for Americans stuck waiting on relief. The bill includes a second round of Payroll Protection Plan funds to small businesses that saw a 25% decline in revenue for any quarter of 2020 compared with that same quarter in 2019.
Individuals will benefit from extended unemployment benefits through March 2021 and a stimulus check in the amount of $600 per individual plus each dependent under the age of 16. For many, these funds are a desperately needed belated Christmas gift. For others, these funds are a windfall. If God has protected you and your family from the more severe consequences of the pandemic, this is an opportunity to surprise a not for profit with a year-end gift.
Three Wise Men Set an Example for You to Follow
Contrary to our wonderful nativity sets, the wise men arrived in Bethlehem after Jesus birth (Mt. 2:1). We honestly do not know if there were three of them, but we do know three significant gifts of gold, frankincense and myrrh were given (Mt. 2:11).
For more read Why you need to know the story of 3 wealthy risk-takers!
I appreciate the wise men. They had a long journey. 2020 has been a long year. They first went to Herod, but they did not see him as the Savior. We too should look to government, but not as our Savior. The wise men surprised Mary and Joseph who did not expect the glad generous gifts to support Jesus in the work He came to establish – healing the sick, giving sight to the blind, releasing the oppressed, and advancing the Kingdom of God (Lk. 4:18).
You have the same opportunity to be glad, generous givers. Give an unexpected gift this year. Surprise someone advancing the Kingdom of God. That is the spirit of Christmas. God surprised the world by generously giving His son. We cannot outgive God, but we can reflect His heart of generosity as we support the least of these.
“Good will come to him who is generous and gives freely, who conducts his affairs with justice.” Ps. 112:5.