It’s still not too late to donate to charitable organizations for the 2020 tax deduction if you can do it by 12/31/2020. There are a few ways you can deduct charitable contributions in your tax returns
1.Donating your cash
As long as the cash (including check, credit card) donation is to the non-profit organizations registered in the US, you can report the donation in Itemized Deduction (Schedule A). In general, the contributions to foreign organizations are not tax-deductible. You will need to keep the receipts or acknowledgment letters issued by the organizations to substantiate your donation amount.
2. Donating your goods
You can donate goods to non-profit organizations such as The Salvation Army, Goodwill etc. You have to keep the tax journal to document the value of the donated items regardless of the donated amount. If your annual non-cash donation is more than $500, you will need to disclose the following information for each donated items in the tax returns:
a. Donation value : here is a guide issued by The Salvation Army to assist you in determining the donation value:
https://satruck.org/Home/DonationValueGuide
b. Original cost of the donated items
3. Donating your stock
If you donate the appreciated stocks directly to a non-profit organization, you do not need to capture any capital gain. At the same time, you can still deduct the fair market value of the stocks you donated in your itemized deduction (schedule A).
4. Donating your IRA
If you are subject to RMD (required minimum distribution) rules as you are over 70.5 years old in 2019 (or 72 years old if you reach 70.5 after Jan 1, 2020), you can fulfill this compliance by donating the money, up to $100,000, directly via your retirement plan account. In this way, IRS does not recognize such distributions as your income. You enjoy the tax benefit regardless of taking itemized deductions or the standard deduction.
5. Donating to a charitable fund
If you want to donate now but you are not sure which organization you want to donate to, this one is for you! You can consider starting a charitable fund in financial institutions. You can deduct as a donation in the tax return in the year you contribute, you can choose to keep the donation in the fund and invest. Although the fund is no longer belong to you legally, you can still make a recommendation to the fund administrator which non-profit organizations you want to donate to. I know Charles Schwab has this kind of program:
https://www.schwabcharitable.org/donor-advised-funds
6. Out of pocket expenses for your volunteer work
Although you can’t deduct your time cost as a donation expense, you can deduct your out-of-pocket expenses such as mileage, parking, travel etc if you offer volunteer services.
I know many of us making contributions simply because we care about others and we want to give back to the community. We should be generous to share the resources regardless of the tax benefits. I hope the above tax deductions will give you additional reasons to give and share!
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