This year has been tough. But for many, ending the year with a donation to your favorite nonprofit organization is a good move financially, emotionally and physically, experts say.
- You can deduct more from your taxes if you give money to charity.
This year’s CARES Act allows individuals an above-the-line deduction up to $300 in cash donations to qualified charities. This applies to people who use the standard deduction on tax returns. And it’s on top of the standard deduction.
“In difficult times, like we are seeing these days, America’s charities are more important than ever,” said Paraclete CEO, Glen Volkhardt. “Many people are in need of tangible practical help, and everyone could use encouragement. For us, Paraclete associates are more active in their communities and neighborhoods than ever before, as international ministry opportunities are limited.”
- You can reduce or even eliminate your federal tax liability through donations.
- In 2020 only, donors who itemize deductions on their tax return have the chance to deduct cash giving up to 100 percent (an increase from 60 percent) of their adjusted gross income. Corporations can deduct 2020 charitable donations up to 25% of income, up from the standard 10%. This will particularly benefit you if you were planning to make a large gift sometime soon.
- Short on cash, but still interested in limiting your tax liability? If you have set up a Donor Advised Fund (DAF), this year could be the time to release those funds to your favorite charity. DAFs allow you to take a tax deduction for contributions to the DAF, then “advise” the sponsor how to distribute the funds to charities at a future date. Don’t have a DAF? Most investment brokers can serve as DAF sponsors and help you set one up.
- Other mechanisms for giving when your income is down include contributing stock holdings without selling them and incurring the tax on the sale, and contributing your mandatory withdrawal from a retirement account and thereby avoiding the tax on the withdrawal.
- You could be happier and your health stronger if you give, offer support, or volunteer your time.
Studies show that volunteering our time is associated with “a positive change in wellbeing.”
Other research shows that giving away money increases happiness and even giving “as little as $5…may be sufficient to produce nontrivial gains in happiness on a given day.”
Feeling good helps our health, said Paraclete associate Ken Van Kirk, who is also a medical doctor serving in Mexico. “There are psychological and physiological changes that happen when we feel good in general,” he said. Giving out of guilt or simply to promote our image don’t produce that “feel-good” effect, he argues. The best foundation for giving is relationship. “It does make me feel better if I’m establishing a relationship through giving, or growing a relationship through giving, or mending a relationship through giving,” he said.
Dr. Van Kirk uses life-saving medical skills in village communities in Mexico, and has been on the receiving end of thoughtful gifts such as baskets, oranges, tortillas, from people with few material possessions. For a particularly long case in which a family with a life-threatening medical need lived with him and his wife for four years, he was given a horse. “When there’s a solid relationship, there’s this giving that comes out of gratitude and love and empathy and compassion,” he said.