How “Giving Tuesday” turned into “Tax Write-off Tuesday”
The main purpose of Giving Tuesday is to provide financial support to charitable organizations. However, there are benefits to individuals and businesses who want to support good causes by donating to eligible organizations if they itemize their tax deductions.
Beginning in 2012, the Tuesday after the Thanksgiving holiday has been designated as “Giving Tuesday”, which falls on November 29 this year. According to the GivingTuesday Data Commons, giving in the U.S. alone totaled $2.7 billion in 2021 which attests to how popular the idea has become since its inception.
As part of the CARES Act of 2020, lawmakers incentivized taxpayers who don’t itemize deductions to make cash gifts to their favorite charities. This was accomplished by allowing write-offs for cash donations.
Is there anything wrong with that?
While the tax breaks for cash gifts in 2020 and 2021 were a bonus for many filers who don’t itemize deductions, individuals and businesses that itemize deductions may be able to get bigger tax write-offs if they gift other types of assets beside cash gifts.
For example, you may consider transferring appreciated stocks or other investments that have been held for more than a year in your taxable portfolio to a charity of your choosing. This strategy may help lower taxes on the capital gains, depending what you owe on the earned income of those assets.
However, to avoid any tax liability, the investor must give their assets directly to the charitable organization instead of selling and then donating the proceeds. Additionally, donations in general have to be made to “qualified organizations” per IRS guidelines. You can only take deductions for charitable donations to your important causes if those charities are not-for-profit 501(c)(3) charitable organizations.
Make your donations wisely
The IRS has set limits on how much you’re allowed to claim when it comes to tax deductible donations. There are many factors to consider if you want to donate to nonprofits on Giving Tuesday, especially for businesses. Therefore, we recommend consulting with a firm that can answer all of your questions.
The professional team at GYL CPAS and Advisors provide a full range of tax, audit, business advisory and accounting services for businesses and individuals. As well as non-traditional areas such as financial planning, employment search and all types of business problem solving.
Giving Tuesday is a fantastic way for you to provide financial support to nonprofit organizations while simultaneously providing you with opportunities to reduce your tax liability. Each year brings a variety of tax-smart giving strategies for donating to worthy causes.