As the end of the year approaches, here are a few items to consider:
Charitable Giving: Since December is a month when many of us make decisions about charitable giving, we'd like to alert you to a slight change in the tax law for 2020. If you no longer itemize your tax deductions, you can still claim certain charitable contributions made in 2020 under a special provision of the CARES act. Tax law changes that took effect in 2017 made the standard deduction a better deal for many taxpayers. An unintended consequence of this change has been to reduce the appeal of charitable giving, since taxpayers who don't itemize can't claim a deduction for charitable contributions. That's changed for this year. Now, taxpayers can deduct cash donations of up to $300 to qualifying charities, even if they don't itemize. This amount is the same for single and married taxpayers. The deduction is taken before arriving at Adjusted Gross Income, which is a slightly better deal than other types of deductions, and those who still itemize aren't affected by the change.
Roth IRA Gifts: If your children or grandchildren have earned income, they are eligible to make a Roth IRA contribution. Others can contribute on their behalf up to amount of the child’s earned income. A small investment now can yield big returns over the course of many decades of tax-free growth and compounding.
529 Plan Contributions: If you haven’t yet contributed to your 529 college savings plan, you have until December 31 to do so and qualify for the state income tax deduction.
And finally, if you have any additional questions about year-end tax planning, please reach out to us as soon as possible. 2021 will be here before we know it.