Still, if you're charitably inclined (and able), there are a variety of ways to donate. But to make the most of your donations, the 2017 tax law demanded that you be more strategic. That’s because the standard deduction for 2020 is $12,400 for single filers ($24,800 for married couples who file jointly). Because you need to itemize to claim a charity tax deduction, those thresholds make it tougher than it used to be. (Note that for 2020 only, you can take up to a $300 deduction for charitable cash contributions, whether or not you itemize.)
Despite this hurdle, you can make the most of your charitable giving and reap the tax benefits. Try these strategies the next time you're thinking about your favorite causes.
Give away your winners
When you think about how to raise money for charity, consider your investment portfolio. If you've got investments that have gone up in value, you can give them as a gift to the organization of your choice. When you donate stocks you've held for more than a year and that have gone up in value, you get a deduction on the amount of their current value, and—this is the big win—you won't owe any capital gains tax on the appreciation. (The charity itself doesn't owe capital gains taxes due to its nonprofit status.)
One caveat: The charity must be set up to receive securities as donations, so get in touch with them to make sure they can accept that kind of gift. You'll want to start this process a few weeks before December 31 to ensure it's completed by the end of the year.
Give away your losers
Conversely, if your portfolio has gone south, you might think about selling the lemons and donating the proceeds to charity. To do this, first sell the stock(s) so you have a realized loss, then give the money. This way, you have a capital loss deduction, which lowers your net (taxable) income.
For example, if you had long-term capital gains of $10,000 and losses of $8,000, you can report a net gain of $2,000. On the other hand, if you have more losses than gains for the year, you can claim up to $3,000 of those losses and deduct them against other types of income, including salary. If you have more than $3,000 in losses, you can hold on to those and apply them in future years. By donating the proceeds of investments that have fallen in value, if you can itemize you'll realize both the capital losses and the deduction for the current value of the investments.